Thesis MBA Twente Miguel Hadzich Final Version 19 Feb 05 PERU

__Mechanisms to formulate electrification projects which leads to greater sustainability for remote communities in Peru
Research MBA Energy & Environment
Mechanisms to formulate electrification projects which lead

to greater sustainability for remote communities in Peru.
Author : Miguel Hadzich
Supervised by : Joy Clancy
February 2005 University of Twente
ACKNOWLEDGEMENTS
I would like to thank the Pontificia Universidad Catlica del Per for giving me an opportunity to study
at the University of Twente.
Special thanks to Dr. Joy Clancy and Dr. Giles Stacey for their technical and scientific support and
patience when dealing with my playful spirit . Thanks to Rianne de Leew, Joop Neinders, Annemaije
Kooijman for his important lessons and Rink for his travels in Peru to get important information for case
studies.
Lastly but not the least, I wish to thank my family for enduring one year of my absence from home;
especially to my wife Carlita.
Miguel Hadzich
University of Twente, The Netherlands
ii
Table of Contents
Acknowledgements ............................................................................................................ ....................................ii
List of Tables, Figures and Insertions .................................................................................................................. iv
Abbreviations and Acronyms................................................................................................... ...............................v
Units of Measurement ............................................................................................................................................vi
Summary.................................................................................................................................................................vii
1: Introduction
1.1
1.2
1.3
1.4
1.5
Background and Context.1

Problem Statement..........2
Research Question...4
Objetives..5
Methodology... .5
2: Sustainability in rural electrification projects in Peru

2.1 Sustainability concepts..6
2.1.1 Sustainability in rural electrification projects..6
2.2 Sustainability in Remote Communities 7
2.2.1
Which are considered Remote Communities?....................................................................................8
2.2.2
Which are the differences between basics needs and income generation?.........................................9
2.2.3
Case studies in Peru.9
2.3 Energy Poverty Development relations & links to sustainability..11
2.3.1
What is the energy needs for?............................................................................................................12
2.3.2
Is electricity the most appropriate form of energy for their particular activity?................................12
2.3.3
Is the lack of access to electricity a constraint to development?........................................................12
2.3.4
Why is there limited access to electricity in remote communities?...................................................13
3: The needs for better projects design
3.1 What is the cause of the problem?............................................................................................ ......................14
3.1.1
Social aspects.14
3.1.2
Economical and Financial aspects..17
3.1.3
Political and Insitutional aspects21
3.1.4
Technical aspects25
3.1.4.1 Types of Technologies26
i) Conventional Technologies
ii) Renewables Energy technologies
3.1.4.2 Selection of Technologies...27
3.1.4.3 Local technology Services...28
3.1.5
Environmental Aspects29
3.2 What sort of tools is needed? ...30
3.2.1
Framework...31
3.2.2
Project Implementation and management....37
3.2.3
Human and Financial resources...40
4. Conclusions and Recommendations
4.1 Conclusions43
4.2 Recommendations..44
REFERENCES .45
ANEXES.48
iii
LIST OF TABLES, FIGURES AND INSERTIONS

List of Tables
Table 1: New Access to Basic and Social Services, 1994-97 (percentages)....1
Table 2: Number of cases studies in Peru.....5
Table 3: Main Rural Electrification Projects in Peru..10
Table 4: Commercial analysis of case studies of rural electrification projects in Peru..22
Table 5: Sustainability of Electrification Projects in Peru..29
Table 6: Example of Energy Consumption and Costs for electrification in Miricharo, Junn32
Table 7: International Softwares for technology selection for rural electrification.......36
List of figures
Fig.1: Framework of the rural energy planning process SADC...3
Fig 2: Poverty Map of Peru FONCODES....13
Fig.3: Projects of rural electrification carried out by the Peruvian government.21
Fig.4: Model of strategy for the introduction of subsidies and trade of rural
electrification in Peru.....23
Fig.5: Framework of the rural energy planning process, model SADC..30
Fig.61: Framework of the rural energy planning process....37
Insertions
Box 1: Rural Electrification in Peru....1
Box 2 : Definitions of sustainability.......2
Box 3.- Disorder of Ministries..14
Box 4.- The power of people in charge of TV signal...14
Box 5.- A sociologist can be solved the problem.15
Box 6.- Time to return for help.16
Box 7.- Indigenous Women leaders..16
Box 8.- .but why should you have it and not us?..17
Box 9.-we can not pay the equipment...17
Box 10.- Successful case in Peru: Electrification of the Taquile Island in Puno.20
Box 11.- The intent of the Dutch Government..20
Box 12.- The fight amongst photovoltaic norms...23
Box 13.- Subsidy or not subsidythat is the question..24
Box 14.- My product is your solution, the others are not..27
Box 15.- We want the biggest diesel motor...27
Box 16.- You are the guilty one to blame.........28
iv
ACRONYMUS AND ABREVIATIONS

ADINELSA Rural Project Administration Enterprise of MINEM
BID
International Comerce Bank
BP
Britsh Petroleum Company
CENERGIA Energy and Environment Enterprise of Peru
CER UNI
Renewable Energy Center of National Engineering University of Peru
CLER
Rural Energy Latinamerican Conference
COFIDE
Development Financial Corporation
CONCYTEC Peruvian Technological and Scientific Council
DEP
Direccin Ejecutiva de Proyectos ( Project Execution Direction)
EASE
World Bank Energy Sector Management Programme
ESCO
Energy Services Company
ESMAP
Energy Sector Management Assistance programme
ETC
Energy Services for the Poor
FAO
Food and Agriculture Organization (UnitedNations)
FONCODES Peruvian Development Social Fund
GEF
Global Environment Facilities
GDP
Gross Domestic Product
GRUPO
Rural Support Group of Catholic University of Peru
IDB
Inter-American Development Bank
IES
International Energy Society
INDECOPI
Consumers Protection Office
IPP
Independent Power Producer
ITDG
Intermediate Technology Development Group
LAC
Latin America and Caribbean
MEM
Ministry of Energy and Mines
MHP
Micro Hydroelectric Plant
MINAGRO
Peruvian Agriculture Ministry
MINEM
Ministry of Energy and Mines
MINSA
Ministry of Public Health
NGO
Non Governmental Organization
NREL
National Renewable Energy Laboratory
O&M
Operations and Maintenance
OSINERG
Organization Supervising Electricity Companies
PAE
Energy Saving Programme of MINEM
PRONAMACHS Water Management Programme of MINAGRO
PUCP
Pontificial Catholic University of Peru
PV
Photovoltaic
RE
Rural Electrification
REA
Rural Electrification Authority
REF
Rural Electrification Fund
SADC
Rural Energy Planning And Environmental Management Programme
SFV
Photovoltaic System
SUNAT
Peruvian Tax Authority
TOTAL
Solar Energy Enterprise of France
UNIDO
United National Development Organization
UNDP
United Nations Development Programme
US$
United States of America Dollar
USA
United States of America
WEC
World Energy Council
WREC
World Renewable Energy Council
UNITS OF MEASUREMENT
GW
GWh
Km
kV
kVA
kW
kWh
MD
MVA
MW
TOE
TWh
Gigawatt
Gigawatt hour
Kilometre
Kilovolt
Kilovolt Ampere
Kilowatt
Kilowatt-hour
Maximum Demand
Megavolt Ampere
Megawatt
Tonnes of Oil Equivalent
Terawatt hour
vi
Summary
Several electrification projects in rural areas, most of them installed by the government in the last 10
years, are not sustainable in Peru, because in their formulation other factors were not considered
different to technological issues - such as social, economic, financial, political and environmental
aspects.
It is essential to have good knowledge about the communities, their needs and resources, in order to get
sustainable development in which rural electrification projects play a role.
This research proposes mechanisms for the formulation of rural electrification projects in way to greater
sustainability for remote communities. Several case studies in the coast, highland and jungle have been
chosen to show the different failures and successes in the application of different models used to
introduce rural electrification projects in Peru.
vii
1: INTRODUCTION
1.1 BACKGROUND AND CONTEXT
Energy is a key ingredient for economic development and poverty alleviation. In the Latin-American
region, the World Bank's past financing of energy projects has clearly improved people's living
conditions by enhancing service quality, extending coverage, and instituting structural and management
reforms to improve efficiency and mobilize the funds needed to meet the region's growing demand for
energy. (The World Bank and Energy in LAC, 1999)
For the poor, the priority is the satisfaction of such basic human needs as jobs, food, health services,
education, housing, clean water and sanitation. Energy plays an important role in ensuring delivery of
these services. (World Energy Council and FAO, 1999)
Box 1.- Rural Electrification in Peru

Peru, a large country with complex geographical features, covers 1.3 million km2 and has a population of over 24 million
people, 70 percent of whom live in urban areas and 30 percent in rural areas. The rural electrification coefficient as reported by
the Ministry of Energy and Mines (MEM) increased from 5 percent in 1993 to 20 percent at the end of 1997. This is evidence
of the great effort made in recent years to improve rural households access to electricity. Nevertheless, much remains to be
done since six million rural households still have no access.
Moreover, the majority of these people live mainly in the highlands and to a lesser extent in the jungle, in areas that are so
isolated that it is unlikely that the population there will gain access to the national grid anytime soon. In the coastal regions, by
contrast, only a small percentage of the population lives in rural areas, and communities there that are not electrified at this
point will be connected to the grid in the short or medium term.
The majority of the rural population in Peru will probably be electrified using small isolated power supply systems. However,
many planners and strategists have their doubts about rural electrification based on this approach, mainly because such systems
carry high costs and because so far they have shown few signs of being sustainable.
Private sector concessionaires are expected to extend the grid naturally with committed resources and some co financing by
the government. It is doubtful, though, judging by the results of many unsustainable experiments with government-supported
schemes in the past, that this framework would be applicable to rural electrification beyond the grid through small isolated
systems or individual systems.
The increase in electrification rates fits within the generally positive picture of social development in Peru during the last five
years, in which poverty declined and a larger share of the population received better nutrition, better education, and access to
safe drinking waterand was generally less poor.
Table 1 provides a breakdown for five basic and social services. Provision of electricity is among those services with the largest
bias toward urban populations.
Basic services are crucial to the progress of poor households. In general, sectoral interventions such as introducing or improving
the water supply, roads, health care, education, or electrification are carried out in an isolated fashionand as a consequence
they have little impact on rural development.
Peru: Rural Electrification - February 2001. Literature N 19
Joint UNDP/World Bank Energy Sector Management Programme (ESMAP)
1.2 PROBLEM STATEMENT:

The electrification in small communities of rural and remote areas is a process that is increasing rapidly
in the last years in Peru.1 The sustainability of these electrification projects has many problems in
technical, social, economic, political and environmental aspects, especially in isolated regions where its
have a low probability of success, such as highlands and jungle.
The sustainability of electrification projects
demands several factors that different authors
(World Energy Council and FAO, 19932, NREL,
19983, Martinot, 20024) take into consideration, but
most of them coincide in integrated solutions that
include social, economic and technological issues.
Likewise, the selection of satisfactory solutions
between different technologies is not only a
technical decision but is necessary to mix with
social, economical, financial, political and
environmental aspects (UNIDO, 2002).5
The social aspects have to include basic needs,
public opinion, type of organizations in existence,
access to communication, role of woman,
acceptance of new technologies, changes in customs
and culture, education, poverty, unemployment, job
creation, etc (EASE,2002 6, Murray, 20007). These
opinions will be analyzed within the Peruvian
context.
Box 2.- Definitions of Sustainability:

Sustainable Development
Development that meets the needs of the
present without compromising the ability of
future generations to meet their own needs.
Sustainable Environment
One in which the Earth's resources are able
to sustain life, health and acceptable
progress, and to renew themselves.
Sustainable Economy
One characterized by development decisions,
policies and practices that do not exhaust
the Earth's resources and respect the
cultural experiences of societies.
Sustaining Society
One that lives in harmony with nature and
within itself.
The economic aspect has to incorporate the paying

capacity of the people, possibilities of getting credit
Sustainable Future
and services, income generation and commercial
One in which a healthy environment,
possibilities as energy service companies. The
economic prosperity and social justice are
pursued
financing part helps to take economic decisions
overtime and options to finance the projects. In this
Reference: www.sdgateway.net/introsd/definitions.htm
research, the economic aspects will be analyzed
using the point of view of different authors
(Saghir,20048, ESMAP,20009) and their application
and validation on Peruvian case studies will be studied.
Peru: Rural Electrification - February 2001 Joint UNDP/World Bank Energy Sector Management Programme
(ESMAP) Literature N 19
2
The Challenge Of Rural Energy Poverty In Developing Countries,
World Energy Council and FAO 1999) Literature N 62
3
Renewable for Sustainable Village Power,NREL,1888, L. Flowers. Literature N 37
4
Renewable Energy markets In Developing Countries -Eric Martinot) Literature N 34
5
UNIDO Rural Energy Initiative, 2002. Literature N 55
6
Enabling Access to Sustainable Energy, 2002. Literature N 13
7
Rural Electrification in Pakistan, Murray. Literature N 36
8
Energy And Poverty, Jamal Saghir. Literature N 44
9
The off-grid market in the post-privatization era, ESMAP, 2000. Literature N 17
Energy
Needs
Assessment
Step 1
Natural
Resources
Assessment
Step 2
Technology
Assessment
Step 3
The environmental aspects have to taken account

the use of natural resources, local pollution and
its influence in the climate change.
Matching
Solutions to
Needs
Step 4
Planning
Methods
Step 5
The political aspect has to taken in account

regulations, subsidies, changes in authorities and
policies, created interests, corruption, programs
of aid assistance and institutional
supports.(ESMAP, 2000) 10
Human
and
Financial
Resources
Project Implementation
and Management
Fig. 1. Framework of the rural energy planning

process 13
In the way to get suitable results it is necessary

involucrate a number of actors that affect on
development of the projects, directly or
indirectly, such us government agencies, NGOs,
universities, local authorities, private developers,
etc.
About the technical aspects more importance has
to be done on the way to considerer the real
energy demand of communities, the use of
energy resources in the area and post-installation
technology services as operation, maintenance,
repair facilities and good design. (ESMAP,
Report 2000) 11
To this last part it is necessary to considerer all different technologies, without any distinction between
them, as well as renewable energy: solar, wind, small hydro as conventional energies: fossil
combustibles and grid connection.
A good decision to make to get sustainability has to integrate technical, economical, financial, social,
politic and environmental solutions adequately. An approach to get it is to use the rural energy planning
process showed in Fig 1, which is an adequate framework that we will use in this research to facilitate
the solution . (SADC, 1998)12
Basically, we follow the steps that are shown in this framework to define the research objective. This
framework provides a suitable mechanism to use in rural energy planning which enables planners to
make comparisons between the energy requirements and the various potential solutions while taking into
account their context, and aids decision makers in the selecting of a good, or at least a satisfactory,
solution.
The correct selection and application of these technologies will not only benefit the environment but also
improve overall quality of life, raising standards of health and bringing about greater social and
environmental equity.
10
Key drivers of improved accessoff-grid service, ESMAP. Literature N 17

Eduardo Villagran. ESMAP 2000. Literature N 17
12
Clancy,J (2000) SADC Rural Energy Planning And Environmental Management Training Programme. Literature N 7
11
1.3 RESEARCH QUESTION

Central Question
Which mechanisms can be used by the energy planners to formulate electrification projects to satisfy
basics needs to lead sustainability in remote communities?
To get an answer to this main question, it is important to know the reality of communities, their needs,
customs, culture, organization, etc. But, it is necessary to understand too which formulating projects
models are being actually used by the energy planners and which are the barriers that they have to do
them, such as lack of time, ignorance of new technologies, non integrated solutions, lack of measures,
etc. Then, it is necessary to know which are the needs for a better project design.
The limit of this proposal is to act about basic needs, with emphasis to rural electrification in remote
communities in Peru, especially highlands and jungle.
Additionally to the main question, we analyze other sub-questions:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.
xii.
What is the energy needs for?

Is electricity the most appropriate form of energy for their particular activity?
Is the lack of access to electricity a constraint to development?13
Why is there limited access to electricity in remote communities?
What will be the effect on the community if only wealthy people gain access to the electricity?
How much are they prepared to pay?
What can they afford to pay for the electricity?
Are the people aware of the different uses of electricity?
Are there any ways in which the poorer members of the community can benefit from
electricity?
What technology is most appropriate for bringing electricity service to a given population?
What are the costs and benefits of the options, and how should the choice among them be made?
Which are the differences between basics needs and income generation?
In the development of this research we have to solve other questions referring to the needs for better
projects design, such as
i.
ii.
iii.
13
What is the cause of the problem?

What sort of tools is needed?
Who are they relevant for?
Clancy,J and Rebedy,L (2000) Electricity in Households and micro enterprises, IT Publications. Literature N 8
1.4 OBJECTIVES
The objective of this research is to give the necessary tools to energy planners in order to improve the
design and implementation of energy interventions at the policy and projects level to get sustainability in
rural electrification projects to remote communities in Peru.
The information in this research can be used to formulate projects by energy planners that work in
NGOs, government agencies, universities, local governments, private enterprises, etc.
After reading this research you will have the necessary tools to decide for the better options to select
technologies to rural electrification in remote areas.
1.5 METHODOLOGY
The strategy that we follow to gathering the data will be achieved trough:
Literature review: GRUPO library, reports of travels, reports of assessment.

Interviews: Government, NGOs and specialized enterprises (solar PV, small wind generators,
small hydro generation)
Case Studies14, travels to :

Number Communities
8
Native Communities
4
Quechua Communities
3
Hispanic Communities
Zone
Jungl, Highlands
Highlands
Coast, Highlands
Technologies
Solar PV , wind generators
Wind generators, small
hydro, solar PV
Solar PV
Table N.2.- Number of cases studies in Peru.

The specific Outputs of the project comprise:
Preparation of surveys and interviews for assessment social, economic, finance, politic and
environments aspects:
How we can collect primary data?
What sort of data can we collected?
14
See Table N 3, Case Studies in Peru, page 10
2: SUSTAINABILITY IN RURAL ELECTRIFICATION PROJECTS IN PERU

2.1 Sustainability concepts
Sustainable development means different things to different people, but the most frequently quoted
definition is from the report Our Common Future (also known as the Brundtland Report): 15
"Sustainable development is development that meets the needs of the present without compromising
the ability of future generations to meet their own needs."
Sustainable development focuses on improving the quality of life for all of the Earth's citizens without
increasing the use of natural resources beyond the capacity of the environment to supply them
indefinitely. It requires an understanding that inaction has consequences and that we must find
innovative ways to change institutional structures and influence individual behavior. It is about taking
action, changing policy and practice at all levels, from the individual to the international.
The concept of sustainable development is applicable in manifold areas of the life of society, including
the economy of energetic. This is why the solutions in the sector of energetic are to be selected in such a
way that they create an integrated system, along with measures for the development of economy and
society.16
2.1.1 Sustainability in rural electrification projects:

More than half of the world's population lives in rural areas, nearly 90% of them - some 2.8 billion - in
the developing countries. The vast majority of these people are dependent on the traditional fuels of
wood, dung and crop residue, often using primitive and inefficient technologies.
For many, this combination barely allows fulfillment of the basic human needs of nutrition, warmth and
light, let alone the possibility of harnessing energy for productive uses which might begin to permit
escape from the cycle of poverty. (World Energy Council and FAO, 1999)17
When taking about rural energy context we will refer to- in this work - only to electrification projects.
In Peru, several electrification projects in rural areas, most of them installed by the government in the
last 10 years, are not sustainable, because in their formulation other factors were not considered
different to technological issues - such as social, economic, financial, political and environmental
aspects.
In Peru most of the rural electrification projects refer to the grid conection extension can be used for
productive purposes. This work is referred to the rural electrification of poor and isolated areas; places
where electricity productive use is very doubtful, due to knowledge of new posiblidades is limited and to
the fact that people are low risks takers.
It is essential to have good knowledge about the communities, their needs and resources, in order to get
sustainable development in which rural electrification projects play a role.
This research proposes mechanisms for the formulation of rural electrification projects in way to greater
sustainability for remote communities.
15
www.sdgateway.net/introsd/definitions.htm
www.worldenergy.org/wecgeis/publications/default/tech_papers/17th_congress/4_1_15.asp#Heading1
17
World Energy Council and FAO, 1999 Literature 62
16
2.2 Sustainability in Remote Communities

The sustainability of electrification projects demands several factors that different authors (World
Energy Council and FAO, 199318, NREL, 199819, Martinot, 200220) take into consideration, but most of
them coincide in integrated solutions that include social, economic and technological issues.
The electrification in small communities of rural and remote areas is a process that is increasing rapidly
in the last years in Peru.21 The sustainability of these electrification projects has many problems in
technical, social, economic, political and environmental aspects, especially in isolated regions where its
have a low probability of success, such as highlands and jungle. Main case studies in the coast,
highland and jungle have been chosen to show the different failures and successes in the application of
different models used to introduce rural electrification projects in Peru.
Likewise, the selection of satisfactory solutions between different technologies is not only a technical
decision but is necessary to mix with social, economical, financial, political and environmental aspects
(UNIDO, 2002).22
In general, a remote community will be considered as sustainable if it satisfies several aspects, such as:
Social aspects: The social aspects have to include basic needs, public opinion, type of organizations in
existence, access to communication, role of woman, acceptance of new technologies, changes in customs
and culture, education, poverty, unemployment, job creation, etc (EASE,2002 23, Murray, 200024). These
opinions will be analyzed within the Peruvian context in the Chapter 2.1.
Economical and Financial aspects: The economic aspect has to incorporate the paying capacity
of the people, possibilities of getting credit and services, income generation and commercial
possibilities as energy service companies. The financing part helps to take economic decisions
overtime and options to finance the projects. In this research, the economic aspects will be
analyzed using the point of view of different authors (Saghir, 200425, ESMAP,200026) and their
application and validation on Peruvian case studies will be studied.
Political and Institutional aspects: The political aspect has to taken in account regulations, subsidies,
changes in authorities and policies, created interests, corruption, programs of aid assistance and
institutional supports. (ESMAP, 2000)12
Technical aspects: About the technical aspects more importance has to be done on the way to
considerer the real energy demand of communities, the use of energy resources in the area and postinstallation technology services as operation, maintenance, repair facilities and good design. (ESMAP,
Report 2000) 27
18
The Challenge Of Rural Energy Poverty In Developing Countries,

World Energy Council and FAO, 1999) Literature N 62
19
Renewable for Sustainable Village Power, NREL, 1998, L. Flowers. Literature N 37
20
Renewable Energy markets In Developing Countries -Eric Martinot) Literature N 34
21
Peru: Rural Electrification - February 2001 Joint UNDP/World Bank Energy Sector Management Programme
(ESMAP) Literature N 19
22
UNIDO Rural Energy Initiative, 2002. Literature N 55
23
Enabling Access to Sustainable Energy, 2002. Literature N 13
24
Rural Electrification in Pakistan, Murray. Literature N 36
25
Energy And Poverty, Jamal Saghir. Literature N 44
26
The off-grid market in the post-privatization era, ESMAP, 2000. Literature N 17
27
To this last part it is necessary to considerer all different technologies, without any distinction between
them, as well as renewable energy: solar, wind, small hydro and conventional energies such as fossil
fuels and grid connection.
Environmental aspects: The environmental aspects have to taken account the use of natural resources,
local pollution and its influence on the climate change.
2.2.1 Which are considered Remote Communities?

According (Dosite, 1999)28 and (Ramani, 1995)29, the rural or remote areas are those which possess more
than one of the following characteristics:
Definition of rural or remote areas
Shortage or absence of electricity and water supplies; mechanical, thermal and
new energy forms; access roads; regular transportation services and other public
facilities.
Shortage of experts and geographical constraints that make the construction of cabled
telecommunications facilities costly.
Severe weather conditions, which makes it necessary to attach many conditions to the facilities
to be built in the area.
Low-level economic activities comprised mainly of farming, fisheries, and handicraft
manufacturing.
Low per-capita income.

Insufficient social infrastructure.
Sparsely populated areas (depopulation).
Insufficient telephone service.
In Peru there is no clear criteria to define if a community is considered remote or not, but it is usual that
most institutions are using FONCODES Poverty Map30 (Social Compensation Fund). Likewise a clear
criteria doesnt exist to define if a community is urban or rural, but family groups of more than 80 -100
households are considered urban.
The FONCODES poverty map doesn't distinguish between urban and rural populations, due to the low
economic revenues (smaller to 50 monthly dollars) and its dispersed geographical distribution of m2 for
inhabitant. The poverty map is a functional and useful tool to find and meet remote and poor
communities and towns in Peru; it is mainly used by governmental and non-governmental institutions
that work in development projects.
The rural electrification criteria that Energy and Mines Ministry (MINEM) is using actually to define
electrification projects are mainly referred to grid connection expansion. Actually, the criteria to consider
if one community is remote and isolated is the distance of grid connection, it should be more than 5
kilometers31; this situation shows us that only towns near grid connection will have electrification in the
next years.
28
29
http://www.dosite.jp/e/index.php
Ramani, 1995. GTZ Literatura N 64
30
Poverty Map, FONCODES. www.foncodes.gob.pe - FONCODES is a governmental institution dedicated to

poverty projects.
31
MINEM.Ministry of Energy and Mines. www.minem.gob.pe
In the international context the governments and International Cooperation Agencies are using different
criteria to define if a community is remote or not, such us: Kilowatt-hour per kilometer of line, distance
from the line, least cost and highest net economic benefit. ESMAP, 2001 32
2.2.2 Which are the differences between basics needs and income generation?
This research is exclusively dedicated to satisfy electricity basic needs in Peru; we study about it because
in Peru there are thousands of communities that have poor development, places in which World Bank
strategies - for fighting against poverty, because they are referred to poor and isolated populations that
don't have enough economic resources to pay for the electricity- can not be used adequately. In Peru
there are very poor people with income generation less than 600 US$ by year33; these communities
necessarily need government help such as Hadzich, 199634 proposes.
Cases of income of revenues due to electricity through productive uses are not considered in this work.
Rural electrification in Peru is almost "politically" defined as an extension of the national interconnected
grid that only reaches populations that are less than 5 km away from this grid.
This work tries to give the necessary tools to assure that rural electrification projects - for poor and far
away areas will be carried out in a sustainable way.
World Energy Council and FAO35 say: It is calculated that an amount of energy roughly equivalent to
7% of the world's electricity production today could cover basic human needs. In an age of apparently
advanced technological and management skills, we have failed in this relatively modest challenge.
This reality of poor communities is according with ESMAP REPORT 200036 that said:
For the foreseeable future the prospects of better energy services for many of the poor will depend not
on the wholesale expansion of electricity and gas networks, but on finding better, cheaper off-grid
energy sources. In rural areas and city slums ways must be found to bring down the costs of cleaner,
more reliable fuels and the costs of doing business in supplying and serving poor communities. Poor
communities and households need help in making informed choices between energy services and may
have to take collective action to secure them. Financing hurdles for consumers on the margins of the cash
economy must also be overcome. Both technological and commercial innovations are neededto bring
down the costs of producing energy and of financing and managing services. While there are many
promising developments, the costs of implementing innovative off-grid projects remain high, and the
challenges of scaling up are daunting. In this context, two government roles are likely to be critical. First,
reforms are needed not only in energy networks but in the broader energy markets on which many of the
poor rely. Second, the use of subsidies must be improved in ways that encourage innovation.
2.2.3 Case studies in Peru

The strategy that we follow to gathering the data will be achieved trough:
Literature review: GRUPO library, reports of travels, reports of assessment.

Interviews: Government, NGOs and specialized enterprises (solar PV, small wind generators,
small hydro generation)
We will analyze 15 important cases that were carried out in the Peru in the last years:
32
ESMAP, 2001. Literature 19, pag 53.

ADINELSA. Interview with Ing. Jorge Velasquez
34
Hadzich, 1996 Conflicts to Renewable Energy Projects in Peru Literature N 65
35
World Energy Council and FAO, 1999. Literature N 62
36
ESMAP REPORT 2000. Literature N 18, Pag 52
33
Main Rural Electrification Projects in Peru.

Case Study
N
Communities
Location
Zone
Year
Institution
Type of
institution
Technology
Type of
Financial
San Miguel de Marankiari
Junn
Jungle
2000
GRUPO PUCP
Private
University
Solar
Total subsidy
San Jernimo de Caete
Lima
Highlands
1994
GRUPO PUCP Solarex
Enterprise
Solar
Total subsidy
Proyecto electrificacin PAE
Severals
places
Coast, Highlands,
Jungle
1995
Ministry of Energy
and Mines
Government
Solar, Wind
Total subsidy
San Francisco de Pucallpa
Pucallpa
Jungle
1992
Solar
Parcially
subsidy
Islas Taquile
Puno
Highlands
1994
Solar
Credit
Severals
places
Coast, Highlands,
Jungle
1995
Solar
Total subsidy
Severals
places
Severals
places
Coast, Highlands,
Jungle
1995
Ministry of Health
Government
Solar
Total subsidy
Jungle
1996
Ministry of Defense
Government
Solar
Total subsidy
Severals
places
Coast, Highlands,
Jungle
1996
ITDG
NGO
Micro-Hydro
Credit
Iquitos
Selva
2002
Ministry of Energy
and Mines
Government
Solar
Parcially
subsidy
Cerro de
Pasco
Coast, Highlands,
Jungle
2002
ELECTROPERU
Public
Enterprise
Solar, Wind
Partial subsidy
RAPS
Enterprise
Solar,Fossil
Partial subsidy
Government
Solar
Total subsidy
Solar
Total subsidy
Solar, Hydro
Total subsidy
Plan Educativo Huascarn
Postas de Salud
Pueblos de Frontera Tiwinza
Microcentrales ITDG
10
Proyecto 1000 sistemas GEF
11
Proyectos electrificacin rural

ADINELSA
12
Proyecto Hibrido RAPS
Iquitos
Jungle
2003
13
FONCODES
Iquitos
Jungle
1998
14
Gran Peru
Iquitos
Jungle
1996
15
Ponchoni
Junn
Jungle
1992
Ministry of Energy
Government
and Mines
Engineering National
Public
University
University
Ministry of Education Government
Ministry of
Presidence
GRUPO PUCP Municipality
GRUPO PUCP
Private
University
Private
University
Table 3 .- Main Rural Electrification Projects in Peru
10
2.3.- Energy Poverty Development relations & links to sustainability

Energy is a key ingredient for economic development and poverty alleviation. In the Latin-American
region, the World Bank's past financing of energy projects has clearly improved people's living
conditions by enhancing service quality, extending coverage, and instituting structural and management
reforms to improve efficiency and mobilize the funds needed to meet the region's growing demand for
energy. (The World Bank and Energy in LAC, 1999)
For the poor, the priority is the satisfaction of such basic human needs as jobs, food, health services,
education, housing, clean water and sanitation. Energy plays an important role in ensuring delivery of
these services. (World Energy Council and FAO, 1999)
Rural electrification does not lead automatically to development. However, there is little evidence to
suggest that rural electricity is a precondition to rural development, or indeed that it acts as a catalyst for
development. (Hurst, 1990)37
Rural electrification usually is a major component of rural energy plans. Rural electrification has a
special place in the provision of energy to rural areas. This is because electricity is identified with the
general modernization of rural areas. Electric motors can be used for any application where a stationary
motor is needed. In addition it can supply lighting to homes and villages; however, electricity is rarely
economic for cooking or transportation.
According to Hurst, many benefits are attributed to rural electrification. The list of potential benefits
attributed to rural electrification is often very long. The possible economic benefits include an increase in
agricultural production and greater rural industrialization. Other linkages with the rural economy could
include an increase in manufacturing activity to supply components for the electric utility such as poles
and lines. The non-financial benefits that can occur can result in an increase in the quality of rural life
and reduce migration to cities. Indeed, he numerous benefits attributed to the spread of the electricity
light includes all kinds of aspects of rural life. These usually focus on morally approvable changes such
as improved homework by students, and evening group social activities, rather than the growth in nighttime bars, clubs, and the video industry.
We agree with World Energy Council and FAO, 199938, in its article titled PROMISING
TECHNOLOGY DEVELOPMENTS when they write: Technology has transformed urban life. It has
been slower to transform life in the rural areas of developing countries. Technologies that have
application only in these areas receive a relatively small proportion of global research and development
expenditure, even though they stand to benefit billions of people. Hence innovation has lagged and
products offered to rural people are technically inferior and offer poor value for money.
There are a number of technologies that offer the potential to assist progress in rural areas. They span
generation, transmission, storage, metering and billing, and include lower capacity limited-current
supplies, single wire earth return systems, gasifiers, certain hybrid systems and, longer term, small gas
turbines and fuel cells. In principle, the renewable energies, such as solar and wind power should find
good application in smaller scale in rural areas despite playing a minor role at this time, due especially to
their low powers and their high initial costs.
Information and communications technologies also offer the promise of helping in rural areas.
Potentially they could transform access to credit and product information, as well as providing new
37
38
Hurst, 1990. The Energy Dimension Literature N 28, page 78

11
possibilities to overcome the difficulties of metering and billing in rural areas, but their penetration is
still very limited at this time.
2.3.1
What is the energy needs for?
In Peru, the situation is similar to ESMAP Report 200039 when it refers to that Electricity differs in
quality from other types of energy. Small amounts are enough to power a radio, a television set, a sound
equipment, and, in some cases, even a cellular phone and a laptop computer. Because other energy
sources cannot substitute electricity in these uses, its economic benefit is higher than when used for
cooking, heating, and pumping water, for example.
From the experience of GRUPO40 who has traveled across Peru in the last 15 years, we can say that
electricity in rural areas is usually used for: lighting, battery charging, radio, TV, VHS, radio
communication, computers, pumps, refrigerators for health vaccines.
In very few cases (almost all referred to grid conection) it is used used for productive purposes, such as
small workshops to produce souvenirs and agroindustry in small scale.
2.3.2
Is electricity the most appropriate form of energy for their particular activity?
In energy aspects in Peru, the more important energy source for rural areas is wood to cook food and
water to supply human needs, after followed by electricity.
Sometimes the electricity is considered the best energy form when it is used to operated electric pumps for lifting
water, but it is unusual due to the high price of electricity in rural areas.
For this reason some of their products are not competitive in the market, due to their high production
costs, that bring economic problems to the producers that work for self-consumption.
Electricity is considered as a symbol of wealth and prosperity in rural areas; as well as power and social prestige.
Actually there appears to be no rural industry development in rural places, even in towns that have connection to
the grid .
2.3.3
Is the lack of access to electricity a constraint to development?
Just as World Energy Council and FAO, 199941 says: In general, the costs of electrification were
underestimated while its benefits were overstated. By itself, electrification does not guarantee economic
development and its benefits tend to accrue to the wealthier groups in electrified areas. It is increasingly
recognized that electrification must be part of a much broader development package. Rural electrification
contributes to, but is not a substitute for, other interventions.
In Peru we coincide with Hurst 26 who says that: Rural electrification must compete with distorted
energy prices. This restricts the financial viability of these projects.
Likewise there are barriers as Hurst says: Project aid is usually unable to remove major constraints to
development (such as the distribution of land holdings) or to influence the macro policies of a country
(such as agricultural or energy prices).
If we consider the electricity as a tool for lifting the life level of towns and in education or health as basic
needs, it is logic to say that: electricity help us in our development. .
39
ESMAP Report 2000. Literature18, Page 54

GRUPO (Rural Areas Support Group) Pontificia Universidad Catlica del Per www.pucp.edu.pe/invest/grupo
41
40
12
2.3.4
Why is there limited access to electricity in remote communities?
In the first place we can say that Peru is a big country that has a lot of isolated and remote communities
with different geographic and weather conditions, which are barriers to diffusion and introduction to
rural electrification.
Secondly, and even more important, is the lack of paying capacity of people in rural areas. In Peru, the
people that live in rural places are very poor (scarcity of services of health, education and low economic
revenue) (more than 80% 42), then it is impossible to develop a good electrification project obtaining
profits; in these places it is only possible to develop electrification projects if there is a subvention
coming from government or non governmental institutions. Even though, when subsidized, projects
found sustainability problems which we will study in Chapter 2.1.
For the specific case of the Peru we have the Map of Poverty of FONCODES43, where we can clearly
appreciate the level of poverty, defined as annual incomes under 600 USdollars.
in most of the Departments, especially in the places where the population is dispersed and far away as it
is the case of the rainforest and highlands. At present - February 2005 - the government is studying the
possibility to give a direct subsidy to poor people (cash) of US $30 monthly per family to 120,000
families in extreme poverty.
Fig 2.- Poverty Map of Peru FONCODES
In general we agree with World Energy Council and FAO, 199944 that say: The costs of electrification
were underestimated while its benefits were overstated. By itself, electrification does not guarantee
economic development and its benefits tend to accrue to the wealthier groups in electrified areas. It is
increasingly recognized that electrification must be part of a much broader development package. Rural
electrification contributes to, but is not a substitute for, other interventions.
42
INEI Statistic Peruvian Institute www.inei.gob.pe

Map of Poverty of FONCODES www.manuela.org.pe/reprosalud1.asp
44
World Energy Council and FAO, 1999 Literature 62.
43
13
3: THE NEEDS FOR BETTER PROJECTS DESIGN

3.1 What is the cause of the problem?
In this chapter we will analyze the problems presented in the rural electrification projects in Peru. We
will complement the information with examples of visited cases, the interviews carried out with
important specialists and the experience of GRUPO on electrification projects.
In each one of these aspects social, economics, financial, politics, technical and environmental - we will
examine the experts opinions at world level and, afterwards, we will analyze if these comments can be
taken into consideration for Peruvian cases.
3.1.1
Social aspects
We will begin saying that each place, town or community is different in geographical, social and
economic aspects, therefore they should be consulted upon the projects objectives, just as Hurst, 199045
says: The needs for energy and also the supply options are site specific. In order to assets the true
energy needs of the rural populations, proper local consultation is essential. Projects must also respond to
any changes in the local environment or to miss-specifications by projects planners. Therefore, they must
contain regular monitoring and evaluation. Genuine participation by local people in project management,
or at least continual consultation, is to key of success.
Box 3.- Disorder of Ministries
This comment is not applicable in Peru because it is

precisely one of the main problems: lack consultation
amongst communities about technology introduction;
in this case, electrification. The selection of the towns
to electrify is frequently made by the Ministries, in
Lima, and using maps and stored information that, in
many cases, are outdated. Commonly they include few
formal orders and many political ones. Only in year
2004, with GEF project46, the government is beginning
to consult population about the introduction of rural
electrification with photovoltaic panels.
Are the people aware of the different uses of

electricity?
Far away and remote communities have a
primary knowledge about the utilities of
electricity and they try to get it by all
possible means; the common cases are using
battery cars and dry cells for radios,
flashlights and TV sets.
45
46
As an example of lack of consultation we can tell

you about the cases that GRUPO has in its
archive. GRUPO installed electrification systems
with photovoltaic panels for medical posts and
schools as requested by the Ministries of Health
or Education respectively, not knowing they have
chosen the same rural towns. In the same way
GRUPO installed with government orders photovoltaic panels in towns where the electricity
had already arrived years ago through connection
to the grid.
Box 4.- The power of people in charge of TV signal.

GRUPO has one experience in indigenous - colonist
community of Ponchoni Junn (case study N 14) where
colonist have power and authority over indigenous people,
because TV antenna is located in the colonist place. The
indigenous people have to work or pay to get TV programs
selected.
Hurst, 1990 The Energy Dimension Literature 28, pag 10

GEF Project: Electrification in Peru www.gefweb.org/Factsheets/Climate/English/UNDP/per-phot.doc
14
What will be the effect on the community if only wealthy people gain access to the electricity?
The people that have electricity facilities are those that reach greater prestige and power in towns. TV
generates great attraction on communities, especially amongst women (women programs) and children
and men (soccer, action movies and news). In places where the signal of many channels arrives, the
people in charge of changing the TV signal acquires influence over the community, especially with
children and women. Other useful services as refrigeration, telecommunications, wireless telephones,
computers, solar pumps, etc. which are being slowly introduced by wealthy people.
Hurst 32 tells us that: Different groups in the rural society may have conflicting goals. An understanding
of relationships between different social groups is crucial for community-level projects such as village
water supply, village woodland, and decentralized village electrification. Effective participation and
consultation is far from a trivial activity. Time, money and expertise must be allowed for this in project
planning.
In Peru, several types of civil associations exist in each community according to the necessities (water,
electrification, popular dining rooms, etc.) and it is very common to select another different association if
the project has different characteristics (in this case: rural electrification). Each association wants to be
independent and autonomous and thus, these types of decisions sometimes lead to internal conflicts
between them and are the cause of fighting - for power - inside the community. In several projects
GRUPO has carried out popular consultations to guide the organization of these associations, it intends
to teach people how they should necessarily include a percentage of women participation and try to
rotate responsibilities amongst themselves. GRUPO suggests not repeating community jobs, but this
doesn't happen in most of the communities where these responsibilities are almost always given to the
same people.
In Peru, these organization problems and conflicts are
very often repeated; once installed the project in the
town, their inhabitants fight internally for their use,
leadership or their management. The problem with the
employment of social scientists is that they need a lot of
time to study the community customs to be able to make
their decisions. The costs of these social investigations
end up costing, sometimes, more than the whole costs of
the project. For this reason, frequently institutions prefer
to carry out the project and, later on, analyze the results,
being these good or bad.
Box 5.- A sociologist can be solved the

problem.
GRUPO has another case in San Miguel of
Marankiari (case study N 1) where they
organized the town based on the installation
of a radio -telecommunication power station.
After some fights amongst them, now it
works correctly, because community meetings
and previous consultations were held, during
several days with the assistance of a
sociologist.
Are there any ways in which the poorer members of the community can benefit from electricity?
This question is complicated; in Peru the gap among those "wealthy" - dominant people of the town and poor is increasing.
Only in the cases where electrification projects are installed through local authorities (municipalities),
and in those where TV sets are placed in the local town square - with access to all those that want to
watch it indistinctly - this gap grows smaller, because wealthy and poor have the same opportunities of
using these services. This type of solutions is completely subsidized by the government or community
authorities.
15
In the case of TV sets installation, home by home, this apparatus plays a very important role in the
categorization or hierarchy of society, it even ends up being the reason of frequent disagreements and
servility of those that don't have access to this service.
Background of the community
Now we will analyze the relationship of electrification projects with the communities:
Types of consumers: In rural areas people are very poor and mainly farmers and as it is usual, in the
countryside they obtain their earnings according to the time when their harvest ends. For this reason they
have to save money for unsafe times that may occur after it (rainfalls, snowstorm, natural disasters,
plagues, illnesses, low prices of products, etc.). These characteristics make the introduction of a
commercial market for energy more and more complicated.
Social welfare: The electricity applications in
Box 6.- Time to return for help.
rural areas help them to be informed, to be able
Time for farmers is calculated in months, years and
to communicate, to learn, to improve their
harvest time, subsequently their decisions about
health and prevent illness, but they use it
innovations are slower. For example, we have known
especially for distraction and leisure. In many
about farmers that have came back to visit GRUPO,
cases illumination is not used as much as radio
to request for electrification, after 4, 6 and 8
or TV sets because people in the countryside get
years after they visited us for the first time.
up before sunrise and they go to bed very early.
Their priorities are long term based.
The use of illumination or TV is changing their
habits, still when some TV programs
specialized to farmers- are on too early so that
people can watch them before they leave to work (between 4 and 7 am). In many cases these new habits
make them lazier, because they wait for their favorite program to finish (native music or news) before
they go to work.
Poverty, Unemployment and Job creation: In the case of electrification for basic needs, the quantity of
work created, like for example the person that has the responsibility of controlling the TV signal or radio
stations, is very scarce. Electrification projects only provide new jobs for one or two people, in the best
of cases, a different person may be in charge of loading batteries. The level of poverty remains almost
constant, but they are more motivated and happier when watching TV or listening to the radio. We could
then say that during leisure moments they forget their economic poverty and changing it for a sense of
spirit wealth through laugh and fun.
The cases of women working to make handcrafts are
Box 7.- Indigenous Women leaders.
very few, but they increase their revenues with the
help of good marketing. This communitarian model
Marisol (spanish name) is the daughter of the
has many beneficiaries because women work better
chief of the Ashaninka Community of San
amongst their peers communicating and improving
Miguel of Marankiari - case study N 1. She
their social interaction.
finished her secondary studies with good
Women and children: In many cases, the women
that remain in their house, listen to the radio the
whole day long and pass many hours watching TV
while they carry out their daily tasks. For this reason
their cultural level is increasing in relation to mens;
the new leaders in remote communities (with
electrification) are women although this only
happens in places where machismo (a very common
case in Peru) is not so deep-rooted. The children
play an important role in energy provision (they take
marks; she won a regional beauty contest and

she participates actively in politics in her
community
as
an
ashanika
authority
representative. In year 2000 she was
presented as a candidate to the governorship
of the district of Peren to represent all the
indigenous communities of the region, but she
did not obtain the minimum votes required. At
present, Marisol has an active political life and
continues studying.
16
batteries to loading sites, buy candles and kerosene for their lamps, buy dry cells, etc.); these jobs reduce
when electrification is introduced. Education and leisure activities are very important for children who
therefore benefit the most from electrification because they even use it to do their school homework.
It is important to point out the incredible attractiveness of the TV set in the communities due to the
programming: for kids, infantile programs and sports; for adult men, action movies, sports (soccer) and
news; music for adolescents and soap operas for women. Therefore, amusement is taking a primordial
place in the community. In very few places, computers are displacing TV sets for children and
adolescents use them to play electronic games (Nintendo, Play Station), as well as to communicate with
their friends via chatting or internet, but this is in its initial stages. Nevertheless, in Peru the use of
internet and public cabins squatter one of the first places in Latin America and the world.
Customs and culture changes: This is an important
point when introducing electricity in towns. In Peru
the loss of identity in colonists communities is very
frequent, because they quickly assimilate all the
changes; but, in the case of the indigenous
communities, in spite they still make an effort to
keep their traditions (language, dressing, music,
food and oral history) they are gradually losing
them.
Box 8.- .but why should you have it and not us?
Some anthropologists have given the alert voice on
the importance of taking care of cultural identity
aspects, trying to prevent the introduction of
electricity. Nevertheless it is very difficult try to
keep it outside of rural communities, because
natives and indigenous people themselves demand
GRUPO: "We know that TV may be a bad influence
in our community, but why should you have it and
not us?
Public Participation: This case has been previously

analyzed, focusing on the fact that it is very usual in electrification plans of the government not to
included
town peoples requests. This happens
during politically changing times when towns have
the courage to request politicians for electrification the latter forget their commitments when elections
are over, very common in Peru and Latin America. Only the authorities that are tenacious, persistent,
who have good public relationships and who insist with politicians are those who obtain support for their
projects.
Rural electrification is usually planned without adequate criteria, without villagers participation, design
in Lima or centralized cities and, frequently, according to political interests. In Peru there is no long term
planning.
3.1.2
Economical and Financial aspects
From the point of view of the government or institutions that promote electrification, we agree with
ESMAP Report 200047: Off-grid electricity sources tend to have much higher capital costs than grid
service. How are these to be financed, given the limits of short-term credit and the low incomes of most
who live off-grid? Many off-grid electricity sources have to long useful life, but their installation must be
amortized over much shorter terms. This is totally certain for Peru.
There are very few successful cases of electricity commercial market in rural areas. In the case of the
micro hydro energy projects of ITDG 48 - with loans of the Development Interamerican Bank BID
these are successful because they all have the necessary commercial conditions. But, in cases of similar
technology micro hydro projects installed by the Peruvian government (Agriculture Ministry Office PRONAMACHS), we can see the situation is very different because they are non sustainable cases.
GRUPO with the help of PRONAMACHS and students of University of Twente (Michael, 200249), have
47
ESMAP Report 2000 Lit18pag53

ITDG, evaluacin de proyectos comerciales en energa hidroelctrica. www.itdg.org.pe
ITDG Peru: Rural Electrification http://rru.worldbank.org/ Documents/ PaperLinks/ 549.pdf
49
Hasseldorf, Michael. Evaluacin de turbinas en Per Literatura 66
48
17
studied some micro hydro power stations, arriving to interesting results which demonstrates the lack of
sustainability of these cases.
The NGO ETC50 in Holland, is carrying out a study regarding the commercialization of electricity in
Peru (Ellen, 2004), in which the commercial possibilities of renewable energy are analyzed; the results
are very discouraging, even if they cover basic needs.
The new company ADINELSA 51 (Administrating Company of Electric Services) is trying to develop
projects with commercial models for remote communities (Cerro de Pasco, Junn, Marcona, Iquitos, etc.)
with some good results, but always providing some subsidy according to the economic possibilities of
each community. In Peru economic differences amongst geographical places are very diverse, therefore
people living in the coast, highlands or rainforest communities have different incomes. Other economic
differences depend on the distances from communities to the nearest populated centers. A unique model
of subsidy is not possibly applicable in Peru.
Just as Hurst 52 says: Energy inputs in support of rural people frequently require recurrent expenditure.
It is rarely possible to sustain aid support for recurrent expenditure for more than few years. For that
reason, in the case of Peru it happens that many of the projects are not sustainable; the problems of
maintenance and repair are of the most frequent in Peru, these make the projects non sustainable, even in
short time.
In general, we agree with World Energy Council and FAO53 that say: The costs of electrification were
underestimated while its benefits were overstated. By itself, electrification does not guarantee economic
development and its benefits tend to accrue to the wealthier groups in electrified areas. It is increasingly
recognized that electrification must be part of a much broader development package. Rural electrification
contributes to, but is not a substitute for, other interventions.
Income level and pay capacity of people
What are the costs and benefits of the options, and how should the choice amongst them be made? We
will analyze the situation in Peru.
At present there is a worldwide introduction of the
Box 9.-we can not pay the equipment.
model proposed by the Grameen Bank 54,that shows us
that regular and small continuous payments are the
In the poor areas of Peru the level of
best solution for poorest places (India). It could be a
income is very low, less than 600 US $1 per
good example, but in Peruvian cases it is very difficult
year per inhabitant. This makes its almost
to introduce the model because the charging system is
impossible to introduce rural
the greatest difficulty, especially because people are
electrification in a commercial way. The
dispersed and the culture of "I won't pay is very deep
monthly expense of an average family is
rooted amongst Peruvians. The Peruvian government
approximately 11 US$1; with this cost the
set the bad example because it condoned most of the
time in which they could pay back a
debts acquired by the communities in many projects.
photovoltaic system - with the current
The culture of the Peruvian people that don't want to
financial conditions- would be of 2.4 years.
pay is very strong, and it embraces all the credit
(Hadzich, 1996)41.
situations and this bad habit results to be the main
barrier for the introduction of commercial systems in rural areas. It is important to changes this, but it
has to be done gradually and include an educational process which is a long reach process. This type of
50
51
52
Interview with Ellen Hoog. www.etc-energy.org /meet.asp?ID=22

Interview with Ing. Jorge Velsquez Gerencia de Comercializacin ADINELSA, 17 june 2004.
53
World Energy and Council(Lit 62, 200)

54
Grammen Bank India. www.gfusa.org/programs/india_initiative
18
social defect is almost impossible to correct in a few years and, what is worst is that the first steps are not
still being taken.
How much are they prepared to pay?
The average rural families are able to pay is between 7 US$55 monthly, but this differs largely depending
on geographical areas. For example, in the rainforest and highlands people are poorer than in the coast,
for this reason we cannot apply a unique pattern of costs and charging for all communities. Therefore,
we have to establish - in the case of basic needs - if they have to be partially or completely subsidized.
What can they afford to pay for electricity?
Depending on the education level and organization of the communities, payment systems can work
better or worst in Peru; we have scarce successful cases - as ITDG micro hydro projects -, but the
majority of them have failed. It is very certain and realistic that people get used TV sets or radios for
leisure turn out to be the first to try to get money to repair broken machines. Thus, they organize all
possible social activities to get funds to fix them, such as festivals, parties, barbecues, etc.
Costs and tariffs comparison
The last models of ADINELSA56 Company suggest an expense in between 15 and 20 soles per month (4
to 6 dollars) depending on the area and the payment possibilities of the inhabitants. In these cases the
company is subsidizing 20 to 50 %.
Feasibility and Barriers for Energy Service Companies
In Peru it is very difficult to develop a market for off-grid energy services. ESMAP REPORT 200057
says: It would offer an array of energy solutions to meet (mostly rural) consumers needsstand alone
photovoltaic systems, battery charging stations, mini- grids powered by sun or wind, and isolated
systems based on diesel, hydropower, and biomass. Nowhere have such markets yet been createdwith
organizations operating on a level playing field and collectively driving the process of electrification.
Decisions on off-grid provision are still largely dominated by governments, donors, and
nongovernmental organizations (NGOs).
The situation in Peru on off grid markets is similar to the same ESMAP Report 2000 when it says: Offgrid markets pose serious challenges. Distance from existing lines, dispersion of potential customers, and
low energy consumption makes access to electricity service through grid extensions more difficult,
regardless of who owns distribution utilities. Private utilities will not build unprofitable lines unless
explicit subsidies (or embedded cross-subsidies) more than compensate for any financial loss over the
life of the project.
For year 2004 there is a plan of develop the GEF project which seeks to get paid back for electricity
services, but their results will be known in a few years time. At present it is not possible to apply a single
strategy of commercial introduction of electrification in isolated and remote towns. This is mainly
because most of them have failed (Case studies Tiwinza N 8, San Francisco N 4). Besides this, there
are no laws that allow subsidies in these areas; neither tributary incentive for possible rural electrification
companies which give services in these areas.
Certain financial indicators exist, such as: Unit cost of energy, simple pay back time, life cycle analysis
and variable annual cost and revenue, which are commonly used in the analyses of the financial projects.
The costs of energy in Peru vary between 0.04 and 0.07US$/kWh in the case of electric rates for the city.
In the countryside it is between 0.02 and 0.04 US$/kWh according to ADINELSA58, with subsidized
rates. The averages of re investment and capital recovery for effects of rural electrification have a time of
55
56
Report ADINELSA http://www.cier.org.uy/(ant)/ent/pe.htm

ADINELSA http://www.cier.org.uy/(ant)/ent/pe.htm
57
ESMAP REPORT 2000, Literatura N 18
58
ADINELSA, http://www.cier.org.uy/(ant)/ent/pe.htm
19
12 years59, but the delay payment level in remote areas reach very high values; this is another barrier for
electricity introduction in remote and isolated areas.
Box 10.- Successful case in Peru: Electrification of the Taquile Island in Puno
A special case is the project of rural electrification in the community of Taquile - Case study N 5 - in
Puno, where people began acquiring their photovoltaic panels by credit with good results. This due mainly
to the organizational level of the communities; their Inca culture (ama sua, ama llulla, ama quella - don't
steal, don't lie, dont be lazy), their "high" and constant level of incomes for concept of tourism and
crafts (compare to neighboring communities) and, especially, for their distance (3 hours in boat through
the Titicaca lake) from the main neighbor cities. All these factors make the culture of "I won't pay"
inexistent. In this community the nonpayers are punished by the town authorities and face the risk of
losing their public positions until they pay their debts. Taquile Islands model is a particular case in Peru
that we would wish to spread, but unfortunately in other places results have been discouraging because
they lack these cultural conditions.
Policy and market instruments

The introduction of subsidizes (partial or total) in the case of satisfying basic needs for the communities
is indispensable. In the chapter concerning political and institutional aspects we will analyze in detail this
topic. In the case of commercial markets for rural electrification, very few successful cases exist, such as
Taquile Islands60 -case study N 5. Recent new charging models are being provided, but we do not know
for sure if they will give sustainable results in the future.
Would a bank lend them the start-up finance?
In what concerns credit capacity and bank loans, we
can say that in Peru banks don't rely on rural
electrification projects for isolated areas to be
profitable, and they make the grant of credits difficult
to get.
Financing Options: There is a growing interest of
international and enterprise institutions (EREA, ASEA
Brown Bovery, Total Energy; BP Lot, Kyocera, etc.)
on investing in Peru for electrification projects (rural
or not) but legal conditions still don't allow them. The
big international companies are awaiting some
changes in electricity sector (previous studies have
already been done on possible wind farms in
Malabrigo, Marcona, Yasila and Hybrid RAPS Project
in Iquitos. The international technical cooperations
(World Bank, GEF, BID, etc) want to help but using
their own strategies - many times mistaken -, and
according to their micro financing plans; but from the
highly commercial point of view this makes these
funds difficult to get.
59
60
Box 11.- The intent of the Dutch Government

In year 1996 the Dutch Embassy1 opened a credit
fund of 5 million dollars for the introduction of
clean energy in Peru. This project failed due to
the bad administration, the bureaucratic
handling by the project administrators (private
company dedicated more to the credit than
electrification topic) and due to the lack of
commitment of banks and financial institutions (COFIDE)1- in charge of enabling the respective
loans for communities and specialized companies.
In a year time, after beginning this project,
Holland cancelled the project due to
recklessness. This project only spent 200,000
dollars of the budget (80,000 dollars in loans and
120,000 dollars in administrative expenses).2
1
COFIDE Development Financial Corporation

Interview with Mr. Donald Tarnawiecki 12 july
2004
2
Horn, Manfred CER UNI. www.cer-uni.edu.pe
20
The financial support to subsidize rural electrification for isolated areas is not considered within the
goals of international cooperations. Therefore, only the Peruvian government and charity NGOs are be
able to satisfy these necessities.
3.1.3
Political and Institutional aspects
In this chapter we will analyze the following questions: Which is the idea in Peru of rural electrification?
Which are the plans of the Ministries about rural electrification for remote populations and for basic
needs? Which are the relationships between different Ministries concerning electrification and which are
the conflicts amongst them?
According to World Energy Council and FAO, 199961 in their article THE WAY FORWARD:
As the scale of continuing rural energy poverty makes clear, very limited progress has resulted from all
the well-intended efforts made to date. A better way forward must be found for the effective use of
scarce development resources. In the re-evaluation taking place three imperatives are emphasized. Rural
energy development must be accorded higher priority by policy makers. Hoping that improvement will
"trickle down" from more advanced sectors of the economy or that rural energy poverty can be solved by
a "technical fix" is unsustainable. Rural energy development must be integrated with other measures
dealing with agriculture, education, infrastructure and social and political factors. Experience has clearly
demonstrated the limited effect of one-dimensional measures. In Peru this doesn't happen.
About institutions they say that: A broader range of institutions also has a supportive role to play.
Foreign aid should focus on capacity building and on projects that can be developed as longer-term
replicable programmes. Non-governmental organizations can assist in articulating and communicating
the needs of the people to government and in putting programmes and projects into effect.
But at present what it happening in Peru? There is a disorder amongst governmental institutions as we
can appreciate it in the following graph (Hadzich, 1996)62 .
Fig. 3: Projects of rural electrification carried out by the Peruvian government
61
World Energy Council and FAO Lit62

62 Hadzich, M (2000) Conflicts to Renewable Energy in Peru.. Presentation to World Renewable Energy
Congress.Literature 65. http://www.cnfl.go.cr/CLER/conferencias/conferencias/MHadzich.htm
21
In this figure we can notice that, there are different ministries that propose the same applications - for
example illumination - but the means of implementations are not the same in each one. Some ministries
put them into practice through credit and others totally subsidize (for free). There is no intention to solve
this problem and, every day, these are more and worst.
In the following table, we will show the means of implementation for each of our case studies:
Case Study
N
Communities
11
San Miguel de
Marankiari
San Jernimo de
Caete
Proyecto electrificacin
PAE
San Francisco de
Pucallpa
Islas Taquile
Plan Educativo
Huascarn
Postas de Salud
Pueblos de Frontera
Tiwinza
Microcentrales ITDG
Proyecto 1000 sistemas
GEF
Proyectos
electrificacin rural
ADINELSA
12
13
14
15
Proyecto Hibrido RAPS

FONCODES
Gran Peru
Ponchoni
1
2
3
4
5
6
7
8
9
10
On Credit
Free
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Table N.- 4. - Commercial analysis of case studies of rural electrification projects in Peru.
Actors role: Government agencies, NGOs, universities, local authorities, private developers,
development agencies, etc.
On the way to getting suitable results it is necessary to include a number of actors that have a direct or
indirect effect on the development of projects, such us government agencies, NGOs, universities, local
authorities, private developers, etc.
Hadzich, 199663, proposes the following acting roles in Peru, fig 2.2, but at present the disorderly
relationships shown in the previous chapter continue to happen in Peru (year 2004) and they don't seem
to give signs for future changes.
In the same study Hadzich proposed that for low classes (rural and isolated areas) the government should
have a subsidiary role as several NGOs have this due to the level of poverty that exists in these places.
Hadzich, M (2000) Conflicts to Renewable Energy in Peru.

http://www.cnfl.go.cr/CLER/conferencias/conferencias/MHadzich.htm
63
22
Fig.4. - Model of strategy proposed by Hadzich64, for the introduction of subsidies and trade of rural
electrification in Peru.
In this figure we can clearly appreciate the level of subsidies for the low and middle class
(f=free=subsidy), the role of companies in the three social classes (s=sales) and the role of NGOs which
is similar to the government's role, only for middle and low classes. In this model, the rural and isolated
areas are considered as low class.
Private vs. Public sector
The private sector is unwilling to introduce electricity at commercial and massive levels in remote areas;
we know of few very shy intents of some companies (Batteries Capsa, Free Energy, Fishing Hayduk,
etc) most of them located in Lima, which have failed in their tentative.
The main problems are: the charging system and the high repair costs and maintenance (in some cases
the travel costs are more expensive than the equipment itself). Even though commercial stores already
exist where wind generators and smaller photovoltaic panels can be acquired, their introduction in the
national market is very slow. Big companies (Total Energie, Siemens, BP Lot, etc.) have some local and
regional distributors in Peru, but their main goal is to enter the market through the big and medium
Governmental bids through the different
Box 12.- The fight amongst photovoltaic norms
ministries (Health, Education, Transport and
Communications, Presidency). The majority
At present two regulatory norms are outlined for
of these bids are for isolated towns, having all
photovoltaic solar energy, both are different and
of them a subsidiary component. (Cases study
influenced by interests of companies related to solar
PRONAMACHS N 15, FONCODES N13,
energy products. The institutions involved in the
Tiwinza N 8, Huascarn N 6)
Licenses and Regulations
Neither licenses nor regulations for cases of
rural electrification exist because there is a
free market. About photovoltaic regulations,
recently the CONCYTEC65 with INDECOPI66
are making small efforts to obtain some type
of regulations and norms for the equipment.
These norms competed against IES UPM
Solar Energy Institute of Polytechnics
64
65
66
implementation of these norms (CONCYTEC

INDECOPI and GEF Project) are fighting between
them to obtain the government's formal support, in
such a way that they can be implemented in the bids and
projects in a compulsory way. The first norm is
governed by IES - UPM Institute of Solar Energy of
the Polytechnic University of Madrid and the second
one by a committee of Peruvian universities and
enterprises promoted by INDECOPI and CONCYTEC.
The fighting still goes on.
Hadzich, M (2000) Conflicts to Renewable Energy in Peru.. Presentation to World Renewable Energy Congress.
http://www.cnfl.go.cr/CLER/conferencias/conferencias/MHadzich.htm
CONCYTEC http://ap.concytec.gob.pe/oficinas/administ/web/index.asp
INDECOPI www.indecopi.gob.pe/upload/crt/PlanNormalizacion2003.PDF
23
University of Madrid that are being used in GEF project Case study N10. At present, in July 2004,
there is no definition about it. Regarding regulations and norms in hydro and wind issues there are still
no studies.
Subsidies, Taxes and Incentives
The bids that have more attraction for companies are the projects in the rainforest area, where no taxes
are paid to promote the Amazonian development, even though these are places where they carry out the
largest projects (Case studies GEF N 10, RAPS N 12, San Francisco N 4, Tiwinza N 8, FONCODES
N 13).
Another commercial strategy is that the
Box 13.- Subsidy or not subsidythat is the question
new companies that arrive to Peru, in their
desire to introduce themselves to the
In this last 20 years this issue has been the key question
market, they subsidize their products and
to all projects and up to now it has no answer. The
they win the first bids (Enterprises
discussions continue and they are endless. This indecision
Solarex, BP Solar and at the moment
is the main obstacle to any law being promulgated
Total Energie), which makes other
regarding renewable energy, not even for electrification
companies leave the country or keep a low
of rural and isolated areas of communities of low economic
profile. Then, commercial stability doesn't
incomes. The disorder continues.
exist in Peru, but even this way, the
market is slowly growing at smaller sales
level and due to small and medium bids
that regions, municipalities and NGOs
carry out.
Political and Institutional Barriers
About Legislation we can say that in Peru we have no laws on renewable energy but for rural
electrification67. The rural electrification planning the promotes government by unlikely to reach to the
isolated and poor populations because its main goal is only electrification via grid connection through
bifurcations of the national interconnected grid. In some cases they have been reached very far away
areas - with this method - but the unfulfillment levels have been so high, and the use of electricity so low
that the beneficiaries no longer use it. Consequently the electric companies cannot recover their
investments. In these cases, it is profitable only for the companies when the government subsidizes the
electricity costs, totally or partially.
Initially, all the towns accept electricity introduction in good faith but, with time, they recognize that the
electricity services don't give them more profits.
In what concerns to the legislation, law intents were made during the last 20 years (PUCP 2000 68, PAE
200369, CENERGIA 199870, ILLA RAYMI 199071) but still there is no political will to formulate them
(there are few politicians that have knowledge on energy issues).
Corruption in projects is highly disseminated in Peru, the case of the Huascarn Project 72 -case studie
N 6 (computers with solar photovoltaic panels for schools) is at present - July 2004 - in process of penal
investigation for wrong management.
67
MINEM Rural electrification http://www.minem.gob.pe/dep/

PUCP, Magazine America Renovable N 11 GRUPO PUCP
69
PAE, JC Romani http://www.minem.gob.pe/dep/
70
CENERGIA Aguinaga http://www.cenergia.org.pe/
71
ILLARAYMI Interview with Dr. Benjamn Marticorena - CONCYTEC
72
Proyecto Huascarn http://www.huascaran.edu.pe/institucional/directivas/decreto067-01.htm
68
24
Institutional Structures in Peru

We coincide with Hurst who says: Rural energy projects are often difficult to organize because they are
not the clear responsibility of any agency within the recipient state.The energy ministry with the main
responsibility for managing energy projects often has an urban bias in its activities, and a very limited
capability to implement projects in rural areas.
It is completely applicable to Peru where Hurst talks about the responsibility: Experience in a number
of countries suggests that one of the major constraint to energy planning is that the agencies most able to
take action in rural areas (usually the Departments of Agriculture, Rural Development, Irrigation and
Forest) have little or no knowledge about energy, while the agencies most knowledgeable about energy
(the Ministry of Energy, the electricity utility and the petroleum supply companies) have little capability
for action in rural areas.
Programs of aid assistance
During the last years were carried out several projects in rural electrification (DEP, PAE, etc.) in Peru, at
present one of them is the GEF project73 , concerning the implementation in the Peruvian rainforest 1000
photovoltaic systems. This project will introduce a new payment model, probably subsidized by the
government, but data are not yet available.
3.1.4
Technical aspects
Before fully dealing with this topic, we will analyze ESMAP Report outlines 200074 that agree with what
happens in Peru:
What technology is the most appropriate for bringing electricity service to a given population?
About the technical aspects more importance has to be given to the way in which to considerer the real
energy demand of communities, the use of energy resources in the area and post-installation technology
services as operation, maintenance, repair facilities and good design. (ESMAP, Report 2000) 75
In this last part it is necessary to considerer all different technologies, without any distinction between
them, as well as renewable energy: solar, wind, small hydro as conventional energies such as fossil
combustibles and grid connection.
Identification of Energy demand: How much electricity is needed?

In Peru, to satisfy basic needs traditional technologies are used (candles, kerosene lamps, batteries, dry
cells) in most of the isolated areas, and only in very few places (of people with high economic incomes)
modern technologies are used (efficient bulbs, solar refrigerators and pumps, etc).
In rural areas the average consumption reaches about 0.3 kWh/day76, which allows them the use of small
saving lamps for illumination and TV sets during 3 or 4 hours a day.
At present the demands identification is made without popular consultation and, mainly, from a
technical and economic point of view. The selection of the equipments capacity is made mainly
according to amount of money invested to the project and trying to get the most numbeer of people
possible. In the cases of isolated and remote places they are only provided with the minimum necessary
for illumination of three lamps and one TV set. In no cases, the popular energy consultation is included
in the introduction of electricity in communities.
73
GEF Project: Electrification in Peru www.gefweb.org/Factsheets/Climate/English/UNDP/per-phot.doc
74
ESMAP Report outlines 2000 Lit18 pag54
75
76
25
Energy Resources Assessment

The natural resource evaluations are made in a pre-conceived form, that is to say, without keeping in
mind all the options of existent natural resources in the areas. For example, in the case of hydroelectric
plants the flow and height measurements are made, but they don't take into account the solar radiation in
the same place, and/or in the case of solar panels they don't take into account the other probable water,
diesel or wind resources that could be more profitable in the area, and so forth.
A great problem in Peru is the absence of data about natural resources and energy sources: in year 2004
the government gave public access to the Peruvian Solar Map77.
On the other hand, little instrumentation is available to make measures by specialized institutions; only
few universities (GRUPO, UNI) have complete instrumentation - and portable - to be able to compare
the different energy options: wind, solar and hydro.
Criteria for the selection of centralized/decentralized systems or communitarian/individual electricity
systems.
This is another issues that has raised wide discussions for many years. If the systems are carried out in a
centralized form then they promote an increase in the population's, migration and pollution in the cities.
In the case of remote communities (objective of this project) only the cases where the use of
decentralized systems have given better results, just as World Energy Council and FAO78 says: "Rural
energy development must be decentralized to place rural people themselves at the heart of planning and
implementation.", have been successful.
3.1.4.1 Types of Technologies
Now, we will talk about the problems that happen in Peru due the introduction of each of the different
technologies:
i.
Conventional Technologies
Fuel and natural gas equipment: Their introduction is very common in times of political elections, Peru is full of
diesel motors broken by lack of fuel or maintenance and repair and, mainly, for unappropiate operation of the
equipment. From year 2005 onwards Camisea gas 79 will arrive to Lima and, rural communities are already thinking
of introducing gas motors. Unfortunately similar experience to that of diesel motors will happen. This technology
could reach to remote places - due its low costs and technical characteristics but again sustainability problems
could arise as described before. Therefore cautions should be taken into consideration so that it doesn't happen
again.
Grid Connection: Just as we said before, the plan rural electrification of the MEM is only done on a gridconnection basis, but they do not include communities located in isolated and remote areas.
ii.
Renewable Energy Technologies
Solar Photovoltaic Panels: They have had a high introduction level in Peru in the last 10 years. The first years of
introduction of this technology multiple technical problems arose (invertors, batteries, controllers, lights,
installations, etc.) but at present they are already solved reaching at high reliability levels (in rural areas reliability
is prioritized in front of efficiency). Solar photovoltaic technology has a great future in Peru, especially to remote
and isolated communities rainforest and highlands - where the energy source (the Sun) will always be permanent
and free.
77
Solar Map of Peru . MINEM Rural electrification http://www.minem.gob.pe/dep/

World Energy Council and FAO Literature 62
79
Camisea Gas Project http://www.minem.gob.pe/gtcicamisea/legislacion_normas_gtci_4.asp
78
26
Small Wind generators: This technology has had a bad experience and a mistaken introduction in the Peruvian
market. Three main local manufaturers exist (Zimic, WAIRA and Celso Dvila) whose technology is not very
reliable, especially for the high costs of maintenance and repairs that make them an expensive technology in
comparison to their competitors (solar, hydro). Likewise the measures of wind speed are very scarce and variable,
sometimes these enterprises import wind equipment but they are expensive due to import taxes.
On the other hand, the fact of trusting on the popular beliefs of what a "good wind" is (according to Chart of
Beaufort) has not given good results. For this technology the initial costs are very high and there are no incentives
for their diffusion; the few devices that are located in Peru are only for demonstration and they belong to wealthy
people.
Small Hydro Turbines: There are few local companies that build water turbines in Peru (Promihdec, Celso Dvila,
ITDG) which are introducing this technology in a commercial way with good results. The government has tried to
repeat the same experience with PRONAMAHCS Programm of Agriculture Ministry - but it spoiled the business
because the rate of uncommitment of towns has reached at present almost 100%. This happened because some
towns that paid their credits - or services - on time, have already stopped paying because the government condoned
the debts of other neighbors towns who could not pay. The political unaccuracy and non intelligent decisions
spoiled the business in this field.
3.1.4.2 Selection of Technologies

Which is the optimal technology to introduce in the
communities? This is a very old problem that this research
will try to solve in next chapter.
In Peru, there is no technical organization capable of
analyzing all the possibilities of use of rural electrification
technologies and of submitting their decisions to a local
consultation level (except for GRUPO). The comparison of
energy costs between different possibilities are not given in
any case, they simply choose imposed technologies. There is
no type of economic comparison made between the different
options (Diesel, grid connection, solar wind or hydro).
Likewise, in these decisions they hardly ever take into
account the social and environmental aspects of the projects.
Box 14.- My product is your solution,

the others are not.
As a result of specialization of the

companies on their products, the solar
panels salesperson wants to sell his
products everywhere. The same
situation occurs with wind generators
and hydroelectric plants salesmen.
Additionally, all fight strongly against
diesel motor technology that sells
more power with a smaller initial cost.
It is common when analyzing diesel
motors cases not to take into account
the town expenses of fuel consumption
during operation time.
Technology meets demandlearning to live with what you have.

Technology selection should mesh with willingness to pay and service requirements. Off-grid
electricityexcept that from twenty-four-hour diesel systems and over dimensioned hydroelectric or
biomass plants differs from grid electricity in that consumption must be actively adjusted to the
supply:
Some systems provide service for only a few hours a
Box 15.- We want the biggest diesel motor
day and thus would not allow refrigeration and other
continuous or off-peak electricity uses. This happens in
This is a normal case in Peru. At present
the majority of photovoltaic projects.
(July 2004) the indigenous community of
A mini-hydro plant either supplies insufficient power
Camisea Cusco, came to GRUPO to
to meet peak demand or has excess capacity off peak. So
request diesel motors instead of solar
consumers must ration their electricity or develop uses
photovoltaic panels, even though they knew
for off-peak supply to ease the financial burden.
they didn't have reliable access to the
Wind- or solar-powered mini grids require an
fuel.
expensive bank of batteries, which puts a financial cap
It was impossible to convince them to
on the systems capacity. Electricity service is often
change their request.
limited to fluorescent lights, radio, and television, and
mechanisms are needed to prevent excessive
consumption by any users.
27
Photovoltaic systems give users the service provided by one or two batteries of 6 or 12 volts, 110115
amperes. That limits uses to basic lighting and some electronic equipment. Electricity differs in quality
from other types of energy. Small amounts of energy are enough to power a radio, a television, sound
equipment, and, in some cases, even a cellular phone and a laptop computer. Because other energy
sources cannot substitute electricity in these uses, its economic benefit is higher than in cooking,
heating, and pumping water, for example (Villagran and Orozco 1988)80. Consumers with grid
electricity have the benefit of opportunity and the convenience of instant and unlimited availability.
But consumers with access to very limited amounts of energy from such off-grid sources as photovoltaic
panels or wind-powered battery charging stations are forced to rationalize their use of electricity, using it
where it tends to generate higher relative benefits. The amount of electricity supplied by these sources is
so small, however, that the tradeoffs between competing uses are often painful. A variety of energy
sources can be used to meet off-grid communities energy needs. Lighting and some electronics might be
powered by photovoltaic systems, while refrigeration and cooking depend on propane or kerosene.
Likewise World Energy Council and FAO81 outline that: Gradually a transition to modern energy
systems (which may utilize traditional energy sources) must be achieved if sustainable economic activity
is to be realized in rural areas.
3.1.4.3 Local technology Services
This is another topic with many problems in Peru, because almost all projects have their failures and
defects in post-sale services.
Peru had several problems in the cases of
project installations. The equipment salesmen
and the installer performed their jobs in an
independent way, without establishing a
relationship between them (Legal problems in
San Francisco de Pucallpa- Case Study N 4
in 199782). These type of problems were later
solved when projects were bid key in hand,
and
where maintenance and training
programs were included for a good number of
years.
Box 16.- You are the one to blame

One of the first projects in rural electrification with
photovoltaic panels was made in San Francisco of
Pucallpa in the year 1997 - case study N 4. The bid
was carried out in two parts, the Solarex company
provided the equipment and another private
enterprise CER- made the installations. When the
project began to fail the company that installed the
equipments blamed to the sellers and these the
installers.
On the case of operation and maintenance

This project had legal problems that involve UNDP
the rural electrification projects have had
and hard times until solutions arrived to satisfy both
problems due to bad training of operators and
separate. The Peruvian government had to invest
users. The training is sometimes very quick
more money parties to solve it.
and frequently done without using native
languages; sometimes they use very technical
catalogs -even in other languages. Finally,
there are problems with the duration of jobs qualified trainers because most of them leave the city after a
period of time without transferring their knowledge to new people in charge of his job. Therefore, this
last problem puts equipments in not well qualified hands who don't know how to operate them in an
appropriate way. Examples of similar problems we found in hundreds in Peru.
The facilities to make the repairs are also another problem; many times the costs of diagnosing the
technical failure, including the trip to the site, to pick up the damaged equipment, to return and to install
it again is so high, that many projects continue without repair. In many cases it is cheaper to buy other
similar equipment instead of repairing the one in use.
80
Villagran and Orozco 1988 Literature 18

World Energy Council and FAO Liter 62 www.worldenergy.org/wec-geis/
82
San Francisco Electrification Project. Interview with Solarex Manager: Ing. Luis Raygada
81
28
3.1.5
Environmental aspects
In the case of rural electrification projects (especially when renewable energies are used) we have good
perspectives in relation to the environment, because renewable energy equipment are friendly with it.
But even this way, it is necessary to carry out Environment Impacts Assessments EIA on energy
projects. This EIA have to be made at local, regional and global levels and these analyses help us to see
their influence on global warming, biodiversity, deforestation, toxic emissions, environmental control
and pollution.
Clean technologies role and the impact range of environmental problems should also be kept in mind the.
In Peru none of the mentioned case studies we have described in this research carried out the EIA, except
the GEF project Case study N 10.
Sustainability Analysis:
Finally, we show a sustainability analysis of case studies described in this research. Even though the
results are subjective, these can give us an idea of their operation.
The qualifications are: High (fulfilled achievements - sustainable project) and Low (unfulfilled
achievements not and projects difficult to emend- could possibly be made sustainable)
Table 5.- Sustainability of Electrification Projects in Peru.
Case
Study N
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Communities
San Miguel de
Marankiari
San Jernimo
de Caete
Proyecto PAE
San Francisco
de Pucallpa
Islas Taquile
Plan
Educativo
Huascarn
Postas de
Salud
Pueblos de
Frontera
Microcentrales
ITDG
Proyecto GEF
Proyectos
ADINELSA
Proyecto
Hibrido RAPS
FONCODES
Gran Peru
Ponchoni
Social
aspects
Economical
Political
Environmental
and
and
aspects
Financial Institutional
aspects
aspects
Technical
aspects
HIGH
LOW
HIGH
HIGH
HIGH
HIGH
LOW
LOW
HIGH
LOW
HIGH
HIGH
LOW
LOW
LOW
HIGH
LOW
LOW
HIGH
LOW
HIGH
HIGH
HIGH
HIGH
HIGH
HIGH
LOW
LOW
HIGH
LOW
HIGH
HIGH
HIGH
HIGH
HIGH
LOW
LOW
LOW
LOW
LOW
HIGH
HIGH
HIGH
HIGH
HIGH
HIGH
HIGH
LOW
HIGH
HIGH
HIGH
HIGH
HIGH
HIGH
HIGH
HIGH
LOW
LOW
LOW
HIGH
HIGH
HIGH
HIGH
HIGH
HIGH
HIGH
LOW
LOW
HIGH
HIGH
HIGH
HIGH
HIGH
HIGH
LOW
29
3.2 What sort of tools is needed?

After identifying the problems that happen in Peru when trying to introduce electricity in remote areas,
we will try to propose a strategy model to assure sustainability in every project. The information
proposed in this chapter can be used by energy planners that work in NGOs, government agencies,
universities, local governments and private enterprises to formulate projects.
The objective of this chapter is to provide with the necessary tools to improve the design and
implementation of energy interventions at the policy and project level to assure sustainability in rural
electrification projects in remote communities in Peru.
Therefore we will try to respond our Central Question: Which mechanisms can be used by the energy
planners to formulate electrification projects to satisfy basic needs to lead sustainability in remote
communities?
To get an answer to this main question it is important to know the background of communities, their
needs, customs, culture, organization, etc. But, it is also necessary to understand which formulating
project models are being used by energy planners and which are the barriers that they have to overcome
such as: lack of time to prepare massive projects, ignorance of new technologies, non integrated
solutions, need of to do good measurements, etc. Then, it is necessary to know which are needs for a
better project design.
Energy
Needs
Assessment
Step 1
Natural
Resources
Assessment
Step 2
Technology
Assessment
Step 3
Matching
Solutions to
Needs
Step 4
Planning
Methods
Step 5
Human
and
Financial
Resources
and Management
The limit of this proposal is to act upon basic

needs, with emphasis on rural electrification in
remote communities in Peru, especially highlands
and rainforest.
A good decision to make to assure sustainability is
integrating technical, economical, financial, social,
politic and environmental solutions adequately. An
approach to get it is to use the rural energy
planning process shown in Fig 2.3 model
SADC83, which is considered an framework to use
in this research to facilitate the solution. We will
use the model SADC because it is more adequate
in projects of easy introduction, decentralized and
easy to understand for planners.
There are other models proposed by Ramani 84- see
chapter Planning - very similar in concepts to
SADC model, but these are much more complex to
understand and use.

process, model SADC 13
Basically, we follow the steps that are shown in

this framework to define the research objective.
This framework provides a suitable mechanism to
use in rural energy planning which enables planners to make comparisons between the energy
83
Clancy,J (2000) SADC Rural Energy Planning And Environmental Management Training Programme.
Literature N 7
84
Ramani, 1995. Rural Energy planning. A government- Enabled Market- Based Approach. Literature N 64
30
requirements and the various potential solutions while taking into account their context, and aids
decision makers in the selecting of a good, or at least a satisfactory, solution.
The correct selection and application of electrification technologies will not only benefit the environment
but also improve overall quality of life, raising standards of health and bringing about greater social and
environmental equity.
3.2.1 FRAMEWORK
Now we will analyze, one by one, the different steps needed to achieve a good plan to carry out a
sustainable electrification project. We will follow the method SADC, considered by GRUPO as the most
appropriate strategy model for Peru due to the successful experiences they are obtaining when using it in
their development projects. We hope that NGOs, government and specialized companies can apply this
methodology in their electrification projects to be able to achieve the necessary sustainability.
Step 1 Energy Needs Assessment

Recognize the communitys energy needs
Initially it is necessary to prepare surveys and interviews for social, economic, finance, politic and
environmental assessment. While doing the surveys we have to keep in mind the ways of getting the
answers and the type of data that we have to obtain from them, so we should ask ourselves:
How can we collect primary data?
What sort of data can we collect?
There are a survey model85 that can be used as an example for the evaluation of the community
necessities. These surveys should include social, economic and political questions as much as possible.
In the case that communities have had previous experiences in some type of development project, then
we could also include some technical questions related with the topic.
To understand this chapter it is very important to know the difference between effective demand and
basic needs, just as Hurst86 explains: The projects meets the energy needs of users. The energy needs of
rural people are intimately linked to their social, economic and political lives; they will vary greatly
different social groups and between different locations. The need for energy may not be matched by a
willingness or ability to pay for the energy (this is the difference between a need and a effective
demand). Energy demands are a derived demand, meaning that people require energy to do something
else that they want for lighting or motive power to pump water rather than energy per se.
The actions that we have to carry out should be: Determine which energy needs are important to the
success of the rural development scheme; ensure that each social group (including women) is genuinely
consulted, and their opinions understood and ensure that energy supply is linked to the availability of
energy- using appliances and energy conversion devices.
85
Model of Surveys in Communities. www.worldenergy.org/wec-geis/
86
31
Hurst, 199087 teaches us in his book The Energy Dimension: At the level of projects and programmes
the key actions are: to encourage the identification of energy inputs and consequences at an early stage
of the project cycle so that they can be integrated into project design at the outset (possibly by requesting
information on current and expected energy use in the project area).
As an example of it we can use the case of Miricharo88 (Case study N 1), where we have an average
energy demand. Nevertheless it should also be kept in mind that, in towns in rural areas, the distribution
of the acquisitive power of the inhabitants is not uniform, since they can consider people "wealthy" (as
the owners of trucks that take out the products up to the highway) and the farmers as much poorer. In the
community of Miricharo a survey on the expense of energy was done and the following average values
of the cost for a family of 5 people were obtained,:
MONTHLY CURRENT
COSTS OF ENERGY
USD/ kWh
Community :
Source of energy
Miricharo
Energy
kWh/month
Candles
1.2
Dry cells
Batteries
Kerosene
Gas
0.72
4.8
2.4
TOTAL
9.12
Quantity
by month
60 candles
8 dry cells
3V
2 loaded
1 gallon
Monthly Cost
S/.
Cost
USD/month
36
15.3
8
8
4
3.4
3.4
1.7
56
23.8
Table 6. Example of Energy Consumption and Costs for electrification concept in Miricharo, Junn.
These results show us that the average family of Miricharo spends an equivalent to US$ 2489 monthly in
energy consumption. At present the use that they are giving to energy are mainly for illumination
(candles, lanterns, petromax) and electricity (batteries, small electric groups) to operate radios and 12 V
TV sets.
Later on with these calculated values, the economic and financial calculations will be made.
87
88
Informe Banco Mundial Miricharo Hadzich, 1996, actualizado a datos de visita en Junio 2004
NOTA : El costo de 1 USD = 2.35 S/. al 25/01/96.
89
32
Step 2 Natural Resources Assessment

Asses local energy resources.
In second place we have to evaluate the existing natural resources in the area of the project, that is to say
we need the geographical and climatic data of the area - or location - where the project will settle, as well
as data on the affected communities if they are far away from the energy source.
According to Hurst90 we have to ask ourselves: What resources are there in the location? Many energy
projects must draw on local resources. All projects will require some labour and capital inputs from rural
people. The mobilization reduces the need for central government expenditures.
It is logical to meet with some problems while measuring, just as World Energy Council and FAO, 1999
91
says: As much traditional energy use occurs outside the commercial sector, data on it is
geographically patchy and discontinuous. This statistical invisibility of much rural energy use reinforces
its neglect and hampers the development of effective policy. In addition, the enormous variety of energy
use patterns, even within quite short distances, makes extrapolation dangerous.
As the following step is to determine the necessary and minimum measures required in each area, as
well as the necessary instruments to use and the right time of the year to collect this data.
Depending on the areas of the project, the necessary data for the evaluation of the local resources can be
measured in the following ways:
Solar energy
Necessary measurements: Solar irradiation kWh/m2.day, number of hours of sun a day.
This can be obtained in the following ways:
Use of the solar map of the Peru 92
Measuring with radiometers
Indirect measurements using photovoltaic panels
Wind energy
Necessary measurements: Wind speed, orientation, hours of wind a day, changes of the speed
with the stations; this can be obtained by:
Using the wind energy map
Measuring with anemometers
Approximation using the Beaufort Chart93
Hydro energy
Necessary measurements: Flow and height, distance from the site to the town
Measurements of river, channel or canal flow.
Measurements of water height or fall.
Measurements of the distance from the possible location of the hydroelectric power
station to the nearest town.
90
Hurst, 1990 The Energy Dimension Literature 28

World Energy Council and FAO,1999 Lit 62
92
Mapa Solar del Per, Ministerio de Energa y Minas, 2004
http://www.minem.gob.pe/gtcicamisea/legislacion_normas_gtci_4.asp
93
Tabla de Beaufort. http://www.cibernautica.com.ar/meteor/beaufort.htm
91
33
Diesel energy
Necessary measurements: Cost of the gallon of fuel (gasoline, petroleum or gas) in the area of the
project, reliability on the acquisition of the fuel any time of the year.
Grid conection
Necessary measurements: Distances from the nearest electric grid to the community, Voltage of the high
tension line.
Step 3 Technology Assessment

Asses available technologies.
We are now in the stage where we can determine the best rural electrification technology to offer.
Then, the other key action is to encourage the consideration of a wide range of technical and other
options at an early stage of project design.
Before explaining about types of available technologies, it is necessary to know some important points
about technical sustainability in rural areas:
Reliability vs. Efficiency: Reliability of the equipment is very important even more than the
improvements in their technical efficiencies. This is also noticed by Hurst 94 who says: Any projects
that will require electricity and that intends to utilize the electricity and that intends to utilize the electric
grid must make sure that the supply of electricity is sufficient reliable. This may involve investment in
electricity transmission and distribution. If decentralized electricity generation is to be installed, the
generation equipment must be reliable. If this is done with diesel generators, then the diesel oil supply
must also be sufficiently reliable.
Reliability of electricity supply is a key issue. Reliability of energy supply is often sacrificed in a
decision-making process that emphasized extension to new areas, rather than market development.
Power blackouts are common in developing countries.
The optimal choice of power station, the plant capacities and energy sources utilized, may be quite
different from the present investment strategies if the current loss of load probability is decreased in rural
areas. For example, smaller, more geographically dispersed power stations, including small hydro power,
may play a larger role.
About the new technologies: Can the projects support new technologies? Renewable energy uses an
energy source that is locally available in the rural environment. This reduces some of the problems of
uncertain supplies of diesel oil and electricity, but it is also important to recognize that some of the
renewable energy sources are inherently variable (e.g. wind, river flow, biomass) or may be already used
by someone else. Moreover the problems of maintaining and repairing renewable energy equipment are
greater than those for conventional systems
Due to the great technological advance in the last years, at present the appropriate technology for rural
and isolated electrification is in its final development phases, which makes these technologies very
reliable and efficient, amongst them we have:
94
34
Types of Technologies
iii.
Conventional Technologies
Fuel and natural gas equipments
Grid Connection
iv.
Renewable Energy Technologies
In this topic, we will mainly use mainly the technological definitions used by Hurst: Where can
renewable energy technologies be used? An assessment of the complete range of energy options is
needed for each location.
Photovoltaic Arrays:
Windmills
Water turbines
Biogas plant: we don't consider this as a possibility because it is modern technology, unknowledgeable in
Peru and with low reliability in rural areas
Step 4 Matching Solutions to Needs

Match technical solutions to needs.
When arriving to this step we already know well the needs of the town, the natural resources of the area
and the knowledge of the diverse possible technologies: it is time to choose the best technological
alternative for this town. There is no a traditional method to decide which the best option is, but instead
we have multiple tools (most of them complex and specialized) that can be used. This step is initially a
Technical-economic selection phase, which is solved entirely by diverse calculation programs (manually
or with software use). After we determine the cost comparison of energy options, then it is only a
question of having the minimum knowledge and criteria to choose the best are; at this point political,
social and environmental aspects can be important for the decision making.
Hurst95 coincides with this appreciation when he says: It is not possible to provide a simple formula to
decide which energy technologies are better than others it all depends on specifics needs and precise
local conditions. There is no substitute for good local knowledge and this knowledge can seldom be
gained quickly or cheaply. Technical solutions are rarely sufficient on their own to achieve rural
development.
Therefore, the eminently technical solutions have to be put together with the economic solutions and, if
we have the data of town needs and its resources, we also need to bond the social and environmental
aspect of the communities.
How to choose the appropriate technology?
For technical calculations purposes we will make use of Software support for technologies selection..
But, due to the absence of high technology tools in rural areas (computers or internet), we will also
include the Manual for planners - Use of Practical guide to select technologies . Spanish Version., a simple
method of calculation for the optimal selection of the proposed technologies.
95
35
In this research we are including the author's own software - Software PERUs96 Programa de Energas
Renovables usando Softwares - Renewable Resources Election Through Software, for non specialists or
technician's who works in institutions (NGOs, government's, enterprises, universities, institutes)
dedicated to rural electrification planning. PERUs is a simple software that provides the technicaleconomic tools to enable any institution to make the correct decisions according to existent natural
resources in the area. The different technologies used and the economic costs for energy introduction in
commercial forms. This software would agree with the appreciation of Hurst who says: "They would
have simple, robust analytical tools for selecting technologies."
For further specialization on these topics and, to carry out projects of great breadth or centralized, it is
necessary choice different recommended software.
We can appreciate some characteristics of international software related to the topic and commonly used
for technology selection and optimization:
Type
Language
Knowledge
of user
Complicated
Technical /
economical
English
Engineer
Solar,
wind,hydro
Complicated
Technical /
economical
English
Engineer
Selection
Solar
Very simple
Technical /
economical
English
University
Student
VIPOR
Distribution
Solar
Complicated
Technical
English
Engineer
PERU
Selection
Solar,
wind,hydro
Simple
Technical /
economical
Hispain
University
Student
Software
Use for
Technology Manipulation
HOMER
Selection /
Comparison
Solar,
wind,hydro,
fuel,grid
RETSCREEN
Selection
SOLARSIZER
Table N.- 7. - International Software for technology selection for rural electrification.
96
Software PERU, Hadzich 2004. Excel Table Course Renewable Energy PUCP
36
Step 5 Planning Methods

Energy
Needs
Assessment
Step 1
Natural
Resources
Assessment
Step 2
Technology
Assessment
Step 3
Matching
Solutions to
Needs
Step 4
Human
and
Financial
Resources
Planning
Methods
Step 5
and Management

process 13
There are several planning models to develop rural

projects but some of them have too many details
that make their application complicated. The model
that we propose as optimun for Peruvian reality is
simplified version of the SADC model. To see fig
2. x.
It is necessary to have a simple model to be used
by ONGs and government's planners who need to
present projects quickly and efficiently. In the case
of big or centralized projects they should use a
more completed model such as SADCs97 and
Ramanis98.
Certain freedom of decision should be left to
project planners and executioners to adapt the
method with a sustainable criteria.
The following steps will give us the
recommendations that the planners have to follow
to apply this model successfully. They contain
simple and important recommendations that can be
applied to the communities.
3.2.2 Project Implementation and Management

Following Hurst99 and ESMAP REPORT 2000100 recommendations and conditioning them to Peruvian
reality, we will give the necessary advice to achieve a good implementation for a sustainable project.
About informations accuracy
Get all information possible

Salesman and developers should have access to accurate and current data on customers and their
location, organizations, grids, solar radiation, rivers, topography, and wind speed and direction.
97
Clancy,J (2000) SADC Rural Energy Planning And Environmental Management Training Programme.
Literature N 7 www.meeti.org.za/sadc/sadc_courses.htm
98
Ramani, K,Reddy A and Islam M (1995) Rural Energy Planning. A government-Enabled Market-Based
Approach GTZ Literature 64
99
100
ESMAP REPORT 2000 www.worldbank.org/html/fpd/esmap/energy_report2000/
37
About technological intervention
Technical interventions should adequate to local conditions and needs.

Technical options should be adaptable to a wide range of changes for local conditions. Technical options
should be known to be reliable in the rural setting: if they are experimental, they should be tested on a
pilot basis together with effective monitoring, evaluation and feedback to record how effective the
technology is in the particular application.
All technical options should be checked out.

Check that a wide range of technical options have been considered and why the chosen option was
selected.
Check out sucessful projects where chosen technology was introduced.

Beware of untried technology check what evidence there is that proves the technology to be successful.
A technology selection methodology.
Use adequate tools to select the technology.

We should have simple, robust analytical tools for selecting technologies. The institutions should
identify, develop, and advertise tools for selecting technologies so that project developers can use them
too and governments and donors can ensure that their resources are allocated optimally. Even if the
institutions provide tools, the selection should be left to the market in similar conditions.
Appropriate system designs.
The design should be the aprpiate.

System designs must meet the customers functional requirementsno more, no less. There must be
functional requirements or design parameters for all major off-grid technologies so that
subsidizers know that least cost is being attempted without sacrificing quality.
Standards need to be appropriate and flexible

Standards need to be appropriate and flexible (such standards may generate controversy, similar to the
sensitivities associated with appropriate technology) customers need to have some up-front choice, so
that they understand the price-quality tradeoff in advance.
Technical support.
Good technical support should be offered

38
Training and organizational development has to be included

Training and organizational development must be part of the initial investment package. For home
photovoltaic systems the bidding specifications must include training in how to use and maintain the
systems. For a mini-hydro system they must include organizational development to be provided by a
third partyan NGO or a community development groupunder contract.
Competitive procurement of goods and services.
Market should be free.

Households and entrepreneurs should have access to accurate, easily grasped information on products.
Local shops should sell replacement parts and services.
Prices should be set freely, and vendors should be able to use financing mechanisms to spread capital
costs over much of the useful life of their investments. Energy goods and services must become
commodities bought and sold at the local store, and governments and donors should have flexible means
for supporting consumers choices through subsidies and other assistance.
Free and open competition among equipment and service providers, under appropriate bidding terms and
conditions, provides another opportunity for minimizing costs. Fair competition requires comparing
apples with apples, so in addition to design and construction parameters, standard bidding documents for
different technologies are often desirable. Fair competition should not mean a purchasing agency, merely
facilitation. The Internet opens new possibilities for communities and developers to effect efficient
purchases.
About administration
Design an appropriate charging system.

Administering payment for electricity in village electrification schemes is often a problem; the users
cannot afford the full cost of supply, and aid agencies and central government are often unwilling to
meet recurrent cost on a long-term basis.
Each management model should be appropiate for the area.

There is no a single model for Peru. In projects where the donors (in Peru it would be the government)
provide energy-producing equipment free for the rural community they consider a contribution (fixed
one-off payment, fixed monthly amount, fixed percentage of initial cost, etc.) as a requisite to assure that
the community or beneficiaries will contribute to a maintenance fund for the equipment. Here we can
consider ADINELSA models useful.
39
Reporting and follow-up.
Report and follow up constantly.

Front-end subsidies create the least dependency and allow the least bureaucracy. But some believe that
most problems surface down the line, requiring intensive follow-up to make sure that systems are being
used and maintained appropriately. Can off-grid customers demand unlimited, reliable service at the
flick of a switch in exchange for paying their bills on time? That depends on what market agents are
willing and able to do at a certain site and point in time. Remote, poor, illiterate, and neglected
households will continue to risk their savings on what they find in their limited markets. Subsidizers
must take this into account when choosing follow-up strategies. At the very least, feedback reports will
minimize future mistakes.
About monitoring
Actions should be monitored honestly.

Activities must be honestly monitored, and technology, project design and associated institutions shoul
be adapted in the light of the knowledge gained.
Ex post evaluations show that institutions and aid agencies have some reluctance to monitor their
activities and report problems in such a way that the necessary changes can be made in the light of this
knowledge. Donors agencies, local administrators and politicians appear often to want to hear only the
good news.
But since rural societies are complex and preliminary information-gathering is inevitably inadequate,
such adaptive(or evolutionary) behavior is the only strategy likely to remain viable. Wherener possible,
arrange an ex-post evaluation by a competent but disinterested party.
More interaction at local level
Necessary changes must be made.

Technical transferring know-how to manufactures and local experts
3.2.3 Human and Financial Resources

About how to chose planners
Choose people in charge of designing the project, carefully.
Ensure the allocation of necessary time, finance and expertise to achieve careful design by people who
know the operating environment.
40
Acerca de la capacidad para disear un buen proyecto
Chose an adequate institution to carry out the project.

Sufficient capability to design, supply, install, operate, maintain and repair energy technologies.
Avoid, as far as posible, foreign appraisers.

Ex post evaluations of energy aid suggest that the local capabilities to undertake all the processes in the
Project cycle effectively are rarely available for small-scale rural energy projects. Furthermore, such
skills cannot easily be imported from overseas (e.g by hiring consultants). However, such capabilities are
essential for success and long-term viability. The development of such capability should therefore be a
central objective of energy planning. Action: Check that necessary capacities have been determined and
are genuinely available. Where gaps are found, ensure that sufficient funds and time are made available
to develop the necessary local capability as part of the project. This is not an expensive luxury, but an
essential input to ensure the viability of a rural development activity.
A broad universe of projects to choose from.
The suitable community should be chosen to implement the project.
With many diverse projects, a funding agency can select those projects with the best demand profile and
organizational makeup and an adequate willingness and capacity to pay. As the market develops,
projects to reach more marginal users will become increasingly feasible. To speed market development,
each agency would disseminate information on its programs through all appropriate means (directly,
through radio and television broadcasts, and by brochures, posters, and newspapers). While the agency
could maintain a master database, it is the marketmade up of individuals, communities, and companies
that would identify most projects.
Mayor interaccin con el nivel local101
Communities should be well organised.

Organizational drivers meet demandchoice in implementation, operation, and maintenance
Commitment
Assure community commitment.

Ensure long-term commitment to meeting energy needs by aid agencies and local institutions so that the
necessary infrastructure can be built up and local people trained.
Subsidies
101
If necessary, subsidize.
ESMAP 2000 www.worldbank.org/html/fpd/esmap/energy_report2000/
Literature 18
41
A level playing field for financial and technical assistancesome options

Governments and donors must develop a mechanism for making subsidies and assistance broadly
accessible. This could range from a small agency, much like a bank, that gives away money with the
same care and responsibility that a commercial bank uses in making loans, to a more hands-on type of
organization such as the U.S. Rural Electrification Administration.
About villagers participation
Create a fund for maintenance and replacement of equipments.
All cost should be included.

Even if the organizational development program takes six months, its full cost must be included up front,
as part of the initial investment package, and its financing provided for by the financial package,
including any subsidy. The program should include training on how to operate, maintain, and replace
systems and how to charge for services in a way that is affordable.
About costs
Costs should adequate to peoples incomes.

Costs of energy interventions must be in proportion to income levels (poverty) of local users. Even if
financial and economics returns on an intervention are which, the absolute amount of the required
investment may exceed the cash-flow resources of individual users. Providing energy equipment free of
charge to uses may not induce sufficient commitment for the proper use and maintenance of the
equipment. Action: ensure projects designers have knowledge of the local situation and consider options
appropriate to local cash availability.
42
4. CONCLUSIONS AND RECOMENDATIONS

4.1. Conclusions
Off-grid electrification means more than off-grid electricity supply. It means an expanded role for users,
a diversity of organizational models, a greater reliance on local organizations and a greater knowledge of
both the energy supply in the broadest sense and the energy demand at the site. Planners, facilitators, and
financiers all benefit from direct exposure to local conditions. The nature of the problem and the possible
solutions are best defined at the site.
The technology proposed for isolated and remote communities electrification will be considered
sustainable if it fulfills the following considerations:
About the community
The community must accept and appropriate this technology. The community must agree with its uses
and applications and realize that this technology promotes a positive development in the quality of its
residents' life.
The community must carry out a correct and organized use of the equipments and its applications. The
community must have intentions to install and to diffuse more of these equipments in its region.
The community must know that the successful off-grid energy projects must understand and address, at
the local level, the nature of the demand and its interaction with:
The local energy source.
The local operating organization.
All possible project development actors, beginning with the communities and
including community-level and other development programs.
Other market agents, such as local vendors and electricians.
Other energy suppliers.
About the technology
The technology must be accepted by the whole community and be constantly used without interruptions.
The equipment must be reliable, although it is not so efficient.
The technical problems of the equipments should be solved by personnel of the community.
In the case of technical failure of equipments, the community must have the economic possibilities for
their repair.
The project must prevent the fighting for power in the community and avoid the opening of an economic
gap among poor and rich.
Renewable energy technologies can certainly be part of the solution provided if they meet the necessary
technical, social and economic criteria.
43
4.2.
Recommendations
It is strongly recommended that rural energy projects are carried out as part of an integrated, sustainable
development project that stimulates more than simply the use of energy.
We suggest institutions which work on rural electrification projects for isolated populations to follow the
steps ans strategists proposed in this work, to assure sustainability.
Finally, a specific manual or guideline for energy planners should be proposed to help them make better
decisions when formulating electrification projects for remote Peruvian communities.
44
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__Mechanisms to formulate electrification projects which leads to greater sustainability for remote communities in Peru

Research MBA Energy & Environment

Mechanisms to formulate electrification projects which lead

Author : Miguel Hadzich

Supervised by : Joy Clancy

February 2005 University of Twente

Background and Context.1

2: Sustainability in rural electrification projects in Peru

LIST OF TABLES, FIGURES AND INSERTIONS

ACRONYMUS AND ABREVIATIONS

Box 1.- Rural Electrification in Peru

1.2 PROBLEM STATEMENT:

Box 2.- Definitions of Sustainability:

The economic aspect has to incorporate the paying

The environmental aspects have to taken account

The political aspect has to taken in account

Fig. 1. Framework of the rural energy planning

In the way to get suitable results it is necessary

Key drivers of improved accessoff-grid service, ESMAP. Literature N 17

1.3 RESEARCH QUESTION

What is the energy needs for?

What is the cause of the problem?

Literature review: GRUPO library, reports of travels, reports of assessment.

Case Studies14, travels to :

Table N.2.- Number of cases studies in Peru.

See Table N 3, Case Studies in Peru, page 10

2: SUSTAINABILITY IN RURAL ELECTRIFICATION PROJECTS IN PERU

2.1.1 Sustainability in rural electrification projects:

2.2 Sustainability in Remote Communities

The Challenge Of Rural Energy Poverty In Developing Countries,

2.2.1 Which are considered Remote Communities?

Low per-capita income.

Poverty Map, FONCODES. www.foncodes.gob.pe - FONCODES is a governmental institution dedicated to

2.2.3 Case studies in Peru

Literature review: GRUPO library, reports of travels, reports of assessment.

ESMAP, 2001. Literature 19, pag 53.

Main Rural Electrification Projects in Peru.

San Miguel de Marankiari

San Jernimo de Caete

GRUPO PUCP Solarex

Proyecto electrificacin PAE

San Francisco de Pucallpa

Plan Educativo Huascarn

Pueblos de Frontera Tiwinza

Proyecto 1000 sistemas GEF

Proyectos electrificacin rural

Proyecto Hibrido RAPS

Table 3 .- Main Rural Electrification Projects in Peru

2.3.- Energy Poverty Development relations & links to sustainability

Hurst, 1990. The Energy Dimension Literature N 28, page 78

What is the energy needs for?

Is the lack of access to electricity a constraint to development?

ESMAP Report 2000. Literature18, Page 54

Why is there limited access to electricity in remote communities?

Fig 2.- Poverty Map of Peru FONCODES

INEI Statistic Peruvian Institute www.inei.gob.pe

3: THE NEEDS FOR BETTER PROJECTS DESIGN

This comment is not applicable in Peru because it is

Are the people aware of the different uses of

As an example of lack of consultation we can tell

Box 4.- The power of people in charge of TV signal.

Hurst, 1990 The Energy Dimension Literature 28, pag 10

Box 5.- A sociologist can be solved the

marks; she won a regional beauty contest and